Croatia’s Growth Trends to Fuel Structural and Fiscal Reforms 

andrej-plenkovic-3332c6ce45512c999f680c514352ef67_view_article_new12 December 2016, VG Intelligence Weekly Issue 34

This past week, the Croatian Government rolled out their 2017 budget proposal that includes their projections for 2018 and 2019. The overall 2017 budget revenue is projected to amount to approximately €16.1 billion, while the budget deficit will amount to approximately €17 billion, which is €800 million more than the 2016 budget and amounts to roughly 1.6% of the GDP. The budget is based on a growth estimate of 3.2% GDP per capita in 2017 and 2018, while Croatia’s GDP per capita is forecast to grow by 3.3% in 2019. Speaking during a Government Cabinet session, Prime Minister (PM) Andrej Plenkovic pointed out that the Croatian economy was on an upswing. He explained that favourable macroeconomic trends offered an opportunity to implement all-encompassing structural and fiscal reforms. He added that the Government’s economic policy will focus on addressing specific structural shortcomings and continuing the growth trend. This positive trend, however, will be hit hard by a mature debt repayment due in 2017. Reviewing the proposed budget in terms of the highest allocated amount, the Finance Ministry will receive the largest slice –  € 6.2 billion or an increase of 28%. A substantial portion of these funds will go towards paying off a significant portion of the public debt that matures next year, which amounts to just over € 5 billion; this is € 1.4 billion more than the amount due in 2016.  Therefore, the issuing of domestic and international bonds will substantially increase; in 2016, €1.8 billion worth of bonds were traded on the local market, €800 million more than last year, and € 1.7 billion traded on international markets, an increase of € 1.1 billion. The strategy for 2017 is to continue the issuance of international bonds, while limiting domestic lending, in order to stimulate domestic lending towards the private sector…

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