In the first six months of 2016, Croatia's budget deficit came to HRK 2.4 billion, making up 0.7 % of GDP, and falling by 5.1 billion kuna compared to H1 2015, Finance Minister Zdravko Maric said at a news conference in Zagreb on Friday. 

The deficit in H1 2016 was equivalent to a third of the budget deficit in 2015, Maric said and added that it was encouraging that Croatia would manage to reach the targeted deficit in 2016.

The overall state revenues in H1 2016 were HRK 56.3 billion, rising by 10.5% as against the corresponding period in 2015. The total expenditures went up by 0.4% to HRK 58.6 billion in H1 2016. The primary surplus in the said period amounted to 3 billion kuna or 0.9% of GDP.

"We can expect good news from the European Commission and from ratings agencies provided that a quality budget for 2017 is put forward," he said.

The positive trends in the state budget are on the back of macroeconomic indicators showing better-than-expected results such as a 2.7% rise in the country's GDP in Q1, a 5.4% rise in industrial output over the first five months, growing consumption (+3.4%) and positive indicators in the tourism and construction sectors.

All this heralds the possibility of GDP for 2016 exceeding the projected 2 percent rate, according to the minister.

Presenting the preliminary figures about the budget execution in H1 2016, Maric said that the rise in revenues could be ascribed to higher tax revenues as well as to better absorption of EU funds.

The collection of taxes increased by 8.1% to HRK 34.3 billion. The contribution to the budget revenues from Value Added Tax (VAT) revenues increased by 1% to HRK 20.5 billion.

Out of the planned collection of 1.6 billion kuna from privatisation, 400 million was realised through the sale of state-owned real estate, the Koncar company's shares and several hotel companies.

As for budget expenditures, outlays for pensions increased by 146.6 million to 18.4 billion kuna.

The minister, however, warned that 2017 would be more challenging with a sizeable foreign debt redemption, with the maturity of two domestic bonds in the amount of HRK 9.5 billion plus an international bond worth 1.5 billion dollars, and a bond in the amount of a billion euros for the motorway sector.

(EUR 1 = HRK 7.5)

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