Yesterday, at the Government session, Prime Minister Andrej Plenković emphasized that this year we expect a budget deficit of around 25 billion kuna and that due to the coronavirus crisis, the Government is going for a budget rebalance. Plenković stated that the Government’s forecast is a GDP decline of 9.4 percent.
– We decided to remain at the level of the expenditure plan of 147.3 billion kuna, and when it comes to revenues, they will fall, and we expect them to be at the level of 122 billion kuna – said Plenković.
Economic expert and professor at the Faculty of Economics in Zagreb, Prof. Dr. Ljubo Jurčić says that this rebalance is primarily a political choice.
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– This means that the rebalance has little to do with the economy, as it does with politics. It is a political decision to maintain this at the level of public activity, the revenue decline comes due to force majeure, due to the crisis and the coronavirus, and there will be a GDP decline of 50 billion kuna, 45 percent of which is a decline in budget revenues, and that is the 25 billion. And that 25 billion will not be balanced by reducing expenditures, but by borrowing – says Jurčić, adding that this rebalance is purely an accounting financial transaction backed by a political decision.
This means that new borrowings will start in the fall.
– In this situation, there can be no other solution. In the next three months, we should make restructuring or reforms so that the losses incurred in some sectors, such as tourism, are compensated by other sectors. If they manage to do that, it would be a creative policy; if they fail, they will have to look at the expenditure side as well – adds Jurčić.
Jurčić states that we must certainly look at how we will compensate for that deficit of 50 billion kuna in the next six months to a year, which we will definitely lose predominantly due to the decline in tourism, transport, and exports.
– I repeat, this is purely an accounting financial game, but there is a lack of economic, business, and industrial policy – says Jurčić, adding that the Government has not yet turned, nor are there any indications that it is turning to economic policy.
– We need to see what is wrong with the Croatian economy. This is currently a distribution policy. What they earn spontaneously, they distribute, and if there is no money at that moment, they transfer it to public debt, that is, they borrow until it goes. The effect of this is always that the people have a lower standard – concludes Jurčić.
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