PM says 2019 draft budget based on 2.9% economic growth rate

Prime Minister Andrej Plenkovic said on Friday expenditures would not be increased in a 2018 budget revision thanks to positive macroeconomic trends, while the 2019 draft budget, based on 2.9% economic growth, was rational and good.

Speaking at a cabinet meeting, Plenkovic reiterated that he was glad the European Commission had revised upwards its forecast of Croatia's economic growth this year, from 2.6 to 2.8%. He said the government's and the Commission's forecasts converged and that this was a result of the predictability of what the government has been doing over the past two years, including adhering to the limits defined in economic and fiscal policy guidelines.

Plenkovic said this year's macroeconomic trends had a positive effect on budgetary revenues as revenues from VAT tax, contributions, excises and income tax were higher than planned. "All these indicators are good and positive, which is why this year we can propose a revised budget which doesn't increase expenditures."

He underlined that enforced state guarantees for the ailing Uljanik shipbuilding group would burden the budget "with what we, perhaps, didn't count on."

He recalled that the budget recorded a HRK 1.6 billion surplus in the first half of this year, saying the trend continued and that he had told ministers he expected of all "a very restrictive policy in the next six weeks" so that the budget could remain balanced by year's end. "That's certainly our goal, considering that the guarantees we will have to pay are mostly guarantees issued by previous governments, notably from September to November 2015."

Speaking of reallocation within the revised 2018 budget, Plenkovic said the health sector would receive HRK 400 million,  HRK 230 million would go for pension indexation, culture, construction, science, the judiciary and regional development, and funds would also be reallocated to the Interior Ministry for migration, and for the population policy.

"It seems to me that, with this budget revision, we achieved what we could at this moment and what was useful," he said, adding that this year's budget deficit was expected to be HRK 2 billion or 0.5% of GDP, exactly as the government predicted.

He asked the ministers to make additional efforts and continue the positive trend despite the Uljanik situation, saying it was crucial for achieving key economic policy goals, including reducing the public debt-to-GDP ratio, which he hopes will be 75% by year's end, despite Uljanik.

In connection with the 2019 draft budget, Plenkovic said that the document was based on a projection of the country's economic growth of 2.9% next year, and the budget gap is set to be 0.4% of Gross Domestic Product.

The draft budget revenues are expected to be HRK 136.1 billion, rising 5.5% in comparison to the original draft budget for 2018.

The budget expenditures are expected to be HRK 140.3 billion, increasing by 6.9 billion compared to the original draft budget for 2018.

Plenkovic expects the revenue side to be based on economic growth as well as the third round of a tax reform.

The expenditure side depends on the strengthening of fiscal sustainability. "We want to implement those measures essential to encourage development, in parallel to taking care of the needs of all layers of the population. Thus, this budget has a dimension of social solidarity as we want to achieve social cohesion," the premier said.

"The (draft) budget is rational, good and conducive to our efforts to achieve the priorities of our programme. We are dedicated to fiscal consolidation and we want to send a strong message that we are the government that knows which course should be taken and we know how to plan," Plenkovic said, among other things.

Text: Hina

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