Budget deficit increased by 100 million kuna

The government adopted the proposal for the rebalancing of the state budget at today’s session, planning an increase in budget revenues by 1.4 billion kuna and expenditures by 1.5 billion kuna, resulting in an increase of the budget deficit by 100 million kuna, which will amount to around 10 billion kuna or 3 percent of GDP this year.

According to Finance Minister Slavko Linić, the total budget revenues for 2012 are projected at 110.3 billion kuna, which is 1.4 billion kuna more than planned, while total expenditures have risen to 120.3 billion kuna, which is 1.5 billion kuna more than planned. The breach of the plan on the expenditure side occurred mainly due to salary costs for users of the state budget, which were 1.6 billion kuna higher than expected.

In addition, expenditures for financial expenses increased by 416 million kuna, in the form of interest on the debt of shipyards and interest on bonds issued in the US market, as well as subsidies by 380 million kuna, of which 340 million relates to the Split shipyard. Social welfare expenditures increased by 150 million kuna, an additional 100 million kuna was needed for repaying debts to pensioners, and 50 million kuna for budget reserves.

Despite such a breach on the expenditure side, the deficit remained within the planned framework thanks to the increase in revenues, the most significant of which were better collection of contributions of nearly 1 billion kuna, and revenues from property – from HANDA 550 million kuna, profits from the Croatian National Bank 480 million kuna, and concessions for the 4G network 300 million kuna. Additionally, customs revenues increased by 71 million kuna.

However, revenues from excise duties fell short by 517 million kuna, primarily due to excise duties on petroleum products, and revenues from administrative fees decreased by 152 million kuna and from other sources by 232 million kuna.
This keeps the state budget deficit below 10 billion kuna, which is 4 billion kuna or 1.2 percentage points of GDP less than last year. Off-budget users plan revenues of 5.4 billion kuna and expenditures of 7.2 billion kuna, with expenditures primarily increased due to intensified investments by Croatian Waters and Croatian Roads.

If we add local government, which is expected to finish the year without a deficit, the total deficit of the consolidated general government in 2012 should amount to 3.5 percent of GDP, which is 0.1 percentage points higher than planned and 0.9 percentage points lower than last year. The government considers the preservation of the planned deficit a success, especially given the state of the economy, which Linić today described as “critical.”

The government estimates that GDP will fall by 1.1 percent this year, with an average inflation rate of 3.4 percent, with the decline primarily resulting from reduced domestic demand, i.e., personal consumption. At the beginning of the year, the government announced GDP growth of 0.8 percent, but in early August, it revised its estimate to a zero growth rate. Prime Minister Zoran Milanović assessed that the rebalancing does not represent either austerity or anti-recession measures but rather an adjustment of the budget in accordance with responsible management of state finances.

Commenting on the breach of the budget in the item of costs for public and state services, Milanović emphasized that nothing has changed in that sector and no rights have been touched despite the economic crisis that has lasted for four years. “We can no longer bear such a burden of public spending, our economy has fallen, and budget costs have remained the same,” Milanović stated.

Unofficially, it has been heard from the government that this year savings will be achieved only on Christmas bonuses for public and state employees, but everything that could not be cut now, because part of the public service unions did not want to agree to changes in the Basic Collective Agreement, will be compensated in 2013.

In the budget proposal for 2013, which will be presented on Monday, the government will propose reducing costs for employees in public and state services by about 1.5 billion kuna, primarily aiming to bring order to special salary supplements that have increased some users’ salaries by up to 50 percent, as announced by the government.