The government should reduce the expenditure side of the budget by 3-4 billion kuna this year, and also by the same amount in 2017, so as to achieve the goal of a budget gap below 3% of BDP and halting the growing public debt in 2018, said participants in a round table discussion on Croatia's fiscal adjustments in Zagreb on Monday.
An advisor to the Croatian National Bank (HNB) governor, Ante Zigman, said that while drawing up the budgets for this and next year, the cabinet of Prime Minister Tihomir Oreskovic should be guided by the targets defined by the European Commission which put Croatia into Excessive Deficit Procedure, having in mind also the expectations of lenders and credit rating agencies.
"And they expect the deficit to be lowered below 3% of BDP, which means that the budget gap should be reduced by 3-4 billion kuna, or 7-8 billion kuna on the aggregate," Zigman said at the round table organised by the association of tax payers called "Lipa".
In order to reach those goals, it is necessary this year to conduct smaller cuts in ministries' (budgets), in parallel to launching structural measures which will pave the way for "the automatic decrease of the deficit" in 2017 and 2018, Zigman said citing reforms in the healthcare system, subsidies, social welfare outlays as well as in the wage budget.
Analyst Velimir Sonje said that the new government's goals "on the strategic level are well-defined", and now it remained to be seen which measures would be implemented.
Sonje quoted the new Finance Minister Zdravko Maric as admitting that there would be no financial adjustments if there were no interventions in budget outlays.
"This is true," Sonje said reiterating that alongside a certain economic growth, it is necessary "to correct expenditures".
Lipa association representative Davor Huic said the first goal should be to reduce the expenditures side of the budget by HRK 3-4 billion.
(EUR 1 = HRK 7.6)