PM Oreskovic Presents Five Reform Areas Driving State Budget Framework

Oreskovic Cover LPJ170LPJ Issue 170, 29 February 2016

On 25 February, the government adopted the Economic and Fiscal Policy Guidelines for the preparation of the 2016 state budget. The new budget envisages state revenues of €14.82 billion, up 3.5% year-on-year (y-o-y), with state expenditures of €15.79 billion, a 2.4% increase y-o-y. The deficit would amount to approximately €984 million, or 2.2% of GDP. The guidelines are based on economic growth projections of 2%.

Finance Minister Zdravko Maric (HDZ) said the most substantial increase of 78.5% was expected from EU funds, while other revenue is likely to decrease by 1.8%, mainly as a result of lower revenues from concessions. Regarding taxes, the largest revenue increase was expected from 1.4% increased tax revenues (above all, VAT (+2.1%)); excise, income and profit taxes are expected to rise 6%, whereas contribution revenues are expected to decline.

Maric said the higher expenditures reflect the national contribution to the EU budget, which is €65.6 million higher, interest rates (+€30.1 million), the national component in the co-financing of EU projects (+€59.05 million), the indexation of pensions (€52.4 million), incentives for new-borns (€13.1 million), the refugee mechanism for Turkey (€2.8 million), and Schengen regime investments (€11.8 million)…

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