STATE BUDGET: Government Proposes 2013 Budget

Last week, at an extraordinary session of the Government Cabinet, the government sent their 2013 Budget proposal with projections for 2014 and 2015.  The proposal forecasts revenues of €15,1 billion, which is an increase of 4.3% from 2012, while expenses increase by 4.8% (€16.5 billion), resulting in a deficit of €1.4 billion or 3.1% of GDP.  The government bases its forecasts on an expected increase of economic activity and a 1.8% GDP increase.  Along with the planned economic growth, the budget also forecasts increased revenue due to increased financial discipline in tax collection, consequences of EU membership (i.e. ending 0% PDV (VAT) for bread, milk, books, medicine, etc. that will increase to 5%) and changes to excise duties.  Expenses will increase, due to increased interest rates (€280 million), allocations to EU budget (€226 million) and state subsidies to shipbuilding sector (€120 million).   The budget proposal also has significant changes to allocations among various ministries.  One of the biggest winners is the Entrepreneurship & Crafts Ministry, whose budget has increased by 83.7% to €102 million.  The ministry has also increased the funding available for EU funded projects (€16 million), which is an increase of €9 million from 2012.  The Ministry of Economy has been allocated €266 million, mostly due to the strategic increase in investments in the energy sector, which is under the auspices of the ministry; in 2012, €2.8 million was allocated to the energy sector and, in 2013, that figure is €97.3 million.  Budgetary reductions are proposed for the Agriculture Ministry (10%), Interior Ministry (6.3%) and the Justice Ministry (5%).   In view of Croatia’s EU membership (1 July 2013), these budgetary allocations are logical, since the majority of EU funded projects will be processed through the Economy and Entrepreneurship ministries.  Also, the reduction within the agricultural sector is a reflection of EU restrictions to state aid.

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