The projections of budget revenues for 2025 are based on the expectation of GDP growth of 3.2 percent, in line with recent forecasts from the Croatian National Bank (HNB) and the European Commission (3.3 percent). In the context of a recession in key euro area economies in the second half of this year and uncertainty regarding economic developments in 2025, the Croatian Employers’ Association (HUP) forecasts slightly slower GDP growth of 2.7 percent, but also lower inflation due to cooling domestic demand, which could lead to more cautious planning.
– The government’s estimate is also based on a significant slowdown in import growth and an acceleration in export growth, which is at least risky in the current vulnerable external environment. The inflation forecast measured by the GDP deflator of 3.7 percent is below the forecasts of the HNB and the EC (3.2 percent), and predicting a deflator for a full percentage point above consumer inflation (2.7 percent) is also risky. The forecast for nominal growth (real + inflation) will hardly exceed six percent, and even more difficult to reach is the seven percent level at which the growth of tax revenues in the budget for 2025 is planned.
The planned growth of contribution revenues of as much as 11 percent is based on even more ambitious assumptions of average gross wage growth of 8 percent and employment growth of 3 percent, while wage growth in the private sector has almost stalled since spring. The employment growth forecast practically at the level of GDP suggests that the budget authors do not expect productivity growth. And it is precisely the acceleration of real productivity growth per hour worked to 2.5 percent annually from 2020 to 2023, to a level twice the EU average, that has been crucial for Croatia’s progress in recent years – emphasize HUP.
