‘Households Hit Harder by Energy Price Increases than VAT’

The revenues and expenditures of the state budget this year have performed slightly better than planned, so despite the decline in GDP, the budget deficit will remain within the planned 10 billion kuna, it has been learned from the Ministry of Finance.

Data on the execution of the budget for the first 11 months of this year show that revenues are 2.5 percent higher than planned while expenditures are simultaneously 1.2 percent lower than planned, resulting in a deficit of 7.78 billion kuna at the end of November, and by the end of the year, it will be around the projected 9.98 billion kuna.

Although the Government has not managed to save the planned amounts on salaries and interest expenditures (due to shipbuilding), through the reduction of other expenditures, four billion kuna has been saved, which is a strong consolidation on the expenditure side, the Ministry reports.

Savings on material expenditures currently amount to 1.2 billion kuna, and on an annual basis, they will be around 10 percent. Significant rationalization has been achieved on all items, from subsidies which have been reduced by 700 million kuna to transportation costs which have been reduced by a quarter this year, to just over 30 million kuna.

This is the first time since the outbreak of the crisis that material costs have been reduced to such an extent, the Ministry emphasizes, noting that the shortfall was only in salaries. Therefore, starting from the New Year, a centralized payroll calculation will be introduced to bring order to that segment, and by signing collective agreements with unions, the issue of reducing costs for Christmas bonuses, severance pay, and other material rights has been resolved.

Despite the decline in economic activities, revenues are higher than planned, primarily due to better collection of contributions of nearly one billion kuna, and an increase in VAT revenues by 8.2 percent due to the increase in the general rate to 25 percent.

On the other hand, revenues from excise duties have fallen by a total of 2.2 percent, mainly because revenues from excise duties on cars have fallen by as much as 18.8 percent, and on petroleum products by five percent.

Revenues from contributions have fallen by 1.4 percent, with the collected amount dropping by 4.9 percent following the Government’s decision to reduce contributions for health insurance. On the other hand, revenues from pension insurance contributions have increased by 1.5 percent, and from employment contributions by 2.1 percent. Revenues from concession fees have also increased by as much as 74.8 percent, primarily due to the concession for the 4G network.

The Ministry of Finance reiterates that this year, through a series of measures, they have sought to relieve the economy by shifting the tax burden from production to consumption, which has significantly reduced state and personal consumption, and as the announced investments did not materialize, the result is a new decline in GDP, which will be between 1.5 and 2 percent by the end of the year.

The Ministry believes that household budgets have been most affected by increases in energy and utility prices, rather than the higher VAT, as the prices of food, clothing, and other necessities have remained at approximately the same level.

The Ministry expects that there could soon be a decrease in energy prices, primarily gas, which should decrease by about 70 lipa per cubic meter in the next month due to the arrival of competition in gas supply.