2015 budget deficit considerably lower than planned


Croatia’s consolidated central government deficit in 2015 was HRK 9.6 billion or 2.9 percent of GDP according to the GFS 2001 methodology, preliminary data provided by the Ministry of Finance show.

The deficit was less than planned by the former government and was due to a higher increase in budget revenues than in expenditures. A budget revision conducted in September 2015 aimed for a deficit of HRK 12.5 billion or 3.8 percent of GDP.

“The annual reduction of the deficit by nearly HRK 3.5 billion or 26.7 percent is the result of a considerably higher increase in revenues than in expenditures,” analysts at Raiffeisebank Austria (RBA) said in their comment on Wednesday.

Total consolidated central government revenue increased by 7.8 percent from 2014 to HRK 127.2 billion.

On the other hand, total expenditure, which includes current operating expenditure and changes to non-financial assets, reached HRK 136.8 billion, up 4.3 percent.

Data for consolidated general government, which includes the consolidated central government and local government budgets, are not available yet. In 2014 the local government budgets recorded a marginal surplus of 0.1 percent.

“For a final assessment of whether or not fiscal consolidation was achieved on the expenditure side of the budget in 2015, we should wait for data for the local government units and hence for the general government budget,” RBA analysts said.

For the purposes of reporting to the European Commission and relevant statistical comparisons with other states, the use of Eurostat’s ESA2010 methodology is required. According to this methodology, the transfer of pension contributions from the second to the first pension pillar does not qualify as income and their amount last year is estimated at HRK 1.3 billion kuna. On the other hand, ESA2010 treats all due but unpaid obligations as expenditure.

“According to the latest report on government work in the 2011-2015 term, (such obligations) amounted to nearly HRK 3 billion at the end of September 2015. Therefore, in the baseline scenario we expect the consolidated general government deficit under the ESA2010 methodology to reach nearly HRK 13.9 billion or 4.2 percent of GDP, which corresponds to the latest projections of the European Commission,” RBA said.

Based on the ESA2010 methodology, the general government deficit could be as much as 25 percent or HRK 4.5 billion lower than in 2014. “Although the risk of unpaid obligations increasing noticeably should not be ignored, especially in the health sector, the fact remains that a certain degree of fiscal consolidation, of about 1.5 percentage points of GDP, was reached last year,” RBA said.

(EUR 1 = HRK 7.64)

(Hina) vm