Croatia’s 2014 budget deficit widens to 5.7% of GDP, gross debt reaches 85% of GDP

By bne IntelliNews April 20, 2015

Croatia’s budget deficit widened to HRK18.84bn (€2.5bn) or 5.7% of GDP last year from HRK17.67bn or 5.4% of GDP in 2013, the country’s statistics office said on April 20.  Consolidated gross debt at the end of last year amounted to HRK279.56bn or 85.0% of GDP, compared to HRK255.13bn or 80.6% of GDP a year before.

The data is based on figures reported in the Excessive Deficit Procedure (EDP) Report which was submitted to the European Commission (EC) at the end of March.

Finance Minister Boris Lalovac has recently warned last year’s deficit is likely to exceed 5% of GDP, amounting between HRK16bn and HRK18bn, higher than the planned HRK15.6bn. In January, Lalovac said preliminary figures were indicating a budget gap of HRK12.8bn at the end of 2014. Croatia performed a second budget revision at the end of October, raising the general budget deficit target to 5% of GDP from the initially planned 4.6% of GDP.

Croatia’s entered EC’s EDP procedure in January last year. The country has to cut deficit to 2.7% of GDP until 2016.

“Fiscal profile remains challenging as we expect consolidation path to continue lag behind the EDP targets. On the revenues side, we see risks related to ambitious EU funds related targets and personal income taxation relief feeding into the figures (0.5% of GDP and not being envisaged in the talks with the EC in early 2014). Expenditures are facing the challenge of approaching elections and still accumulating arrears in the healthcare,” Erste Group Research commented on April 20.

The EC said in its winter forecast it expects the general government deficit to reach 5.5% of GDP this year and to remain at around the same level in 2016. As for last year, the commission expected a deficit of 5% of GDP. The commission has forecast general government gross debt to increase this year and in 2016 to 84.9% of GDP and 88.7% of GDP respectively from 81.4% of GDP last year.

In a bid to increase revenue and cut deficit, the Croatian government decided last week to increase the excise duties on fuel and tobacco. 

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