In the first three months of this year HRK 29.14 billion poured into the state budget, which is an increase of 3.7% on the year while expenditure amounted to HRK 31.05 billion, an annual drop of 6.5%, data from the Finance Ministry indicates.

In addition to transactions in net non-financial assets of HRK 600 million, this has resulted in a budget gap of HRK 2.5 billion, which is HRK 3.2 billion less than in Q1 last year.

"In principle, this is a continuation of the positive trends that started last year while a more complete assessment of the situation in public finances is prevented by further methodological changes to budget statistics, particularly by the fact that interim financing was in force in Q1, which restricted budget spending. As such the sustainability of current trends will only be visible over the next few months, particularly with reference to the expenditure side of the budget," the Croatian Chamber of Commerce (HGK) said in a comment on the latest data released by the ministry.

Budget revenue in Q1 this year was one billion kuna higher than in the same period last year and the growth is a reflection of increased tax revenue (+3%), which comprises 53.4% of budget revenue, and higher revenue from social contributions (+3.2%), which account for 33.6% of budget revenue.

Revenue increased strongly due to aid in the amount of HRK 1.1 billion, impacted by the better absorption of European Union funds, the HGK noted.

The expenditure side of the budget was reduced due to a reduction of 70.8% in subsidies compared to the same period last year as well as a 40% reduction in allowances for workers and a 36.5% reduction in the cost of consumption of commodities and services, and a reduction of 3.4% in expenditure for interest.

Methodological changes have to be taken into account as well, and data based on GFS 2001 methodology, which is being applied since January 20016, includes amended items for salaries and certain allowances for primary and secondary school staff who are paid from the state budget, which has resulted in a lower amount expressed in the item of allowances for workers and an increase in the item of assistance within the general government, the ministry explained.

"The achieved results in the state budget in this year's first quarter are more favourable than in the same period last year. Namely, with an increase in budget revenue and fall in expenditure a primary surplus has occurred, which continues to steer fiscal policies toward the aim of a central government budget deficit of 2.5% of GDP," Zvonimir Savic of the HGK said.

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