Croatias government plans to cut 2012 budget deficit to 2.8% of GDP.

By bne IntelliNews January 27, 2012
Croatia plans to cut its budget deficit to HRK 9.6bn, or 2.8% of GDP, in 2012, news agency HINA reported, quoting details of this year's budget draft, adopted by the government. The macro-economic framework is based on 0.8% growth in 2012 and annual inflation of 2.4%. The government see the economy rising 1.5% in 2013 and 2.5% in 2014. This year's economic growth will be propped up by higher state investments. Most of the investments would be made in projects, which will replace imports with domestic output, finance minister Slavko Linic was quoted as saying. They will include the sectors of electricity, gas, port operations and railways. The gross investment in 2012 is expected to increase by 7.4%. The 2012 draft budget also envisages expenditures of HRK 117.6bn (EUR 15.5bn) and revenues of HRK 108bn. The government has decided to increase VAT rate to 25% from 23%, while VAT rate on children food, oils, fats, and water bills will be reduced to 10%. In addition, the deadline for VAT payment will be extended to 45 days. The VAT rate on some tourism and hospitality services is expected to be reduced as of January 1, 2013. The contribution rate on mandatory health insurance will be decreased to 13% from 15%, which will cut annual revenue to the budget by about HRK 2.4bn. Non-taxable income will be increased to HRK 2,000. PM Zoran Milanovic said that the budget has to be realistic and ambitious in order to stimulate economic growth.
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