Plenković praises ‘social’ budget, deficit and expenditures rise sharply

Prime Minister Andrej Plenković stated on Thursday in the Croatian Parliament that the proposed state budget for 2026 is socially sustainable and developmental as it ensures and enables investments that provide Croatia with greater competitiveness and productivity, as well as resilience to crises.

According to the Government’s proposal, the state anticipates total revenues of 35.7 billion euros and expenditures of 39.8 billion euros for the next year. The planned revenues are 2.7 billion euros higher than the plan of the “rebalanced” budget for this year, while expenditures are up by three billion euros.

– This budget is social; it protects the standard of citizens and guarantees the redistributive role of the state that cares for the vulnerable – said Plenković while presenting the proposal for the state budget for the next year with projections for 2027 and 2028 to the members of Parliament.

In addition, the proposed budget is sustainable and demonstrates responsibility towards public finances in the demanding and uncertain economic circumstances we face in Europe and the world, emphasized Prime Minister Plenković.

The budget ensures investments for greater competitiveness

He also added that the proposed budget is developmental as it ensures investments that provide us with greater competitiveness and productivity, as well as resilience to crises.

Prime Minister Plenković stated that the new state budget of the Republic of Croatia is being adopted at a time of slowing economic growth in Europe and the world, during which our country continues to follow the path of positive macroeconomic trends and continuous growth even in such circumstances.

He noted that GDP growth in the EU is projected at 1.4 percent next year, i.e., 1.2 percent in the euro area, while the forecasts of the Government and the European Commission indicate that the Croatian economy will grow by about 2.7 percent in 2026 and by about 2.5 percent in 2027.

The European Commission predicts higher growth than Croatia only for Ireland, Malta, Cyprus, and Poland.

Croatia will end the year at 78 percent of the average development of the EU

– Thus, we continue to catch up with countries that were able to take advantage of EU membership earlier. Croatia will end this year at 78 percent of the average development of the EU, and by this measure, we will be above Slovakia, Greece, Latvia, and Bulgaria, and we will reach the same level as Hungary today – added Plenković.

The Prime Minister also emphasized that in our country, the budget deficit will remain below the reference 3 percent next year, while in 2027 it will be 2.8 percent.

In addition, a further reduction in the share of public debt in GDP is expected from 56.3 to 56 percent next year. This means that Croatia adheres to the Maastricht criteria regarding budget deficit and public debt share in GDP, he stated.

Plenković also highlighted that the increased budget expenditures of 39.8 billion euros, which is an increase of 8.3 percent, are accompanied by a growth in budget revenues planned for 2026 at 35.7 billion euros, which is an increase of 2.7 billion euros compared to this year.

The foundations for greater growth in budget revenues are the continuous increase in business activity and tax revenues, employment growth, and the growth of industrial production exports, another record tourist year, as well as the successful utilization of European funds.

Now, in relation to the annual membership fee paid to the European budget and the funds we have drawn, we are in a surplus of 18 billion euros, emphasized Prime Minister Plenković.

He also announced that we now face the process of negotiations and advocating for Croatian priorities in the negotiations on the new multiannual financial framework from 2028 to 2034, for which, according to initial estimates, 16.8 billion euros have been secured, which is 2 billion euros more for Croatia.

Increased budget expenditures

Plenković emphasized that the increased budget expenditures are primarily directed towards improving the quality of life for citizens and the most vulnerable, especially persons with disabilities and retirees.

Thus, for pensions in 2026, 10.2 billion euros are planned, which is one billion more than this year. Additionally, alongside the regular growth of pensions through indexing, for the first time at the end of this year, an annual supplement to pensions will be paid, which will raise the average total pension above 700 euros.

Increased expenditures, among other things, are directed towards further wage growth, which is the result of a series of tax reliefs on income, said Plenković.

Plenković called on Možemo! to ‘relieve’ work in Zagreb

He called on Sandra Benčić (Možemo!) and the City of Zagreb to ‘relieve work’ as Zagreb currently has both a lower and a higher income tax rate at the highest level. Plenković also stated that they have energized the capital market in Croatia and issued as many as 17 state securities, for the first time 3 national state bonds, and 14 treasury bills.

He expressed satisfaction that next year they plan to allocate as much as 804 million euros for demographic policy measures. He also reported that in the last three months, 656 more children were born in the country than in the same period last year.

One of the key priorities for young families is affordable housing

Additionally, one of the key priorities for young families will be housing and affordable housing, as this is also the foundation of demographic revitalization.

Moreover, 300 million euros are being invested in student accommodation in 18 cities, and student hourly wages are being increased, etc. For social benefits and support for those in need, 1.3 billion euros will be allocated from the state budget, especially for recipients of the inclusive supplement, of which there are currently about 200,000.

Speaking about inflationary pressures, Plenković stated that thanks to numerous government measures during the crisis period, inflation has been reduced from 11 percent in 2022 to 3 percent on an annual basis in 2024.

The reason why it remains higher than acceptable is the actions of domestic actors and individuals in the price-setting chain, despite the fact that the Government has helped them overcome the crisis.

– We expect inflation to continue to decrease in the coming period. In 2026, we project it at 2.8 percent – he emphasized.

Investments will be made in digitalization, decarbonization, education, healthcare…

Plenković also stated that in the coming years, among other things, they will continue to focus on developmental priorities that will generate growth and strengthen the resilience of the economy, i.e., investing in digitalization, decarbonization, and education, as well as continuing support for the economy.

He announced that a new industrial strategy is being prepared, which directs investments and support towards the industries of the future. He emphasized that balanced regional development is key to the budget, as it has been for all these years.

Investments in less developed areas and local projects are also increasing; budget funds for healthcare, education, and training are also increasing, he added, noting that investments in education now amount to five percent of GDP. Investments in defense and the modernization of the Croatian army, sports, and similar areas are also continuing.

The Deputy Prime Minister and Minister of Finance Marko Primorac stated that for strengthening our strategic autonomy, considering foreign policy circumstances, significant investments are being made in defense, as well as in strengthening the energy sector and ensuring additional alternative supply routes.