Gov't bases draft budget for 2018 on economic growth estimate of 2.9%

Prime Minister Andrej Plenkovic said on Thursday that the budget for 2018 was based on an economic growth forecast of 2.9%, noting that in the medium term macroeconomic policies would be based on making use of all positive impulses in international and domestic environments.

"The framework of our economic policy is determined by the exit from a six-year recession, based on growth, exports of goods and services, personal consumption, investments and a better absorption of EU funds," Plenkovic said at the start of a government session that was discussing next year's budget.

Plenkovic said that in the medium term the government wanted its macroeconomic policies to be geared towards making use of all positive impulses in international and domestic environments and that it would continue working to strengthen foundations for a lasting and stable economic growth.

He said that GDP in 2018 was expected to grow by 2.9% in real terms while in 2019 it was expected to grow by 2.6% and in 2020 by 2.5%.

The budget deficit in 2018 is expected to amount to 0.5% of GDP, an even better result than in 2016, the PM said, adding that in 2019 he expected the balancing of the budget and in 2020 a surplus of 0.8% of GDP. In 2016 the general government deficit was 0.9% of GDP.

Plenkovic went on to say that the reduction of the public debt to GDP ratio would continue at a fast pace, twice as fast as the EU average.

"We want the share of public debt in GDP to stand at 76.6% in 2018, at 73.4% in 2019 and at 69.5% of GDP in 2020. That is the framework of our policy of fiscal discipline and sustainability and a very rational approach to public finance," said the PM.

By the end of this year the public debt to GDP ratio could be at 79.8%, he said.

"If we meet that target, we will be below 80%. It is a symbolically very important signal and I believe that all those who follow us and want to see how we are coping within the European Semester and with regard to commitments that lie ahead, will appreciate such a responsible fiscal policy, notably with regard to the reduction of macroeconomic imbalances, which, now that we have exited the Excessive Deficit Procedure, is the main objective of this government," said Plenkovic.

The draft budget for 2018 envisages HRK 129 billion in revenue, up 6.1% compared to the current budget. Total expenditure is estimated at HRK 133.3 billion, five billion more.

The general government deficit is forecast at 0.5% of GDP or HRK 2 billion, according to the draft budget for 2018 which the government will send to the parliament for consideration.

Text: Hina

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