Linić Cuts Growth Estimate from 1.8% to 0.7%

The government will soon reduce the economic growth projection for this year from 1.8% to 0.7% through a budget rebalancing, which means a decrease of about 1.2 billion kuna for budget revenues.

Expenditures will also be reduced to keep the budget deficit at around 3% of GDP, announced Finance Minister Slavko Linić today, confirming that the salaries of state and public sector employees will be reduced by lowering the coefficient by 3%. It is evident that everyone believes that the government’s projections of economic growth this year of 1.8% are unrealistic and need to be lowered, as it is clear that we can only rely on state investments, since the private sector assesses that it is unable to significantly contribute to economic growth. This is the reason for lowering the economic growth estimate this year from 1.8% to 0.7%, which also means lower revenues, which is why some expenditures need to be reduced, Linić stated in the program ‘In the Network of the First’ on Croatian Radio.

The rebalancing will reduce our revenues by about 1.2 billion kuna, considering that we are lowering our growth projections, and on the other hand, we will reduce expenditures to maintain the deficit at around 3% of GDP as we planned, he said.

Expenditures will be reduced, among other things, by lowering the salaries of employees in public and state services, and Linić says this is not an additional reduction.

We have also assessed that salaries should be somewhat lower in 2013 than in 2012. This is the reason why we started with a central payroll calculation, which will introduce more order and greater control, and we estimate that we will save here. We previously agreed with the unions on Christmas bonuses, vacation allowances, transportation costs, etc., but all of this was not enough, and therefore a decision was prepared to reduce the coefficients of employees by 3%, Linić said, announcing that the calculation with the reduced coefficients for the salaries of state and public sector employees would take effect with the next salary.

Linić believes that the unions will oppose this decision, considering it an additional blow to employees, as salaries are not adjusted to the living costs that have risen in the past year, and salaries have already been frozen for two to three years.

We have already agreed on reducing certain salary supplements, so this is yet another measure that affects the labor cost of employees in the public and state sector and will certainly not be well received. However, these are also very clear messages from the government – how over-indebted we are, the economy is not growing, and we are failing to stimulate the economy, and at such a moment, we cannot spend on debt.

Our debt is rising to 180 billion kuna, we are approaching a share of 60% of GDP, and this is the reason we must understand that we need to reduce something – pensions not, but salaries yes, emphasized Linić.

He also points out that the reduction of salaries is not a matter of negotiation with the unions, but a government decision that is not negotiable.

When asked whether salaries will be reduced for everyone, or whether some will be increased, for example, teachers, the finance minister said that their part of the income that was not regulated by any contract or regulation was reduced in July last year. The Ministry of Labor will only correct the salaries of teachers in that part, while all others will have their coefficients reduced by 3%, concluded Linić.