The Croatian Employers' Association (HUP) and the Croatian Chamber of Commerce (HGK) said that the primary focus in creating the draft 2016 budget was to reduce the deficit and to stop the further growth of public debt, while they consider that the biggest risk to achieve the budget is the projected economic growth, stressing that significant cuts were possible only through implementing reforms.
The Croatian government adopted the draft 2016 budget at its meeting on Thursday, projecting revenues at HRK 114.9 billion, expenditures at HRK 122.4 billion and a deficit of HRK 7.5 billion or 2.2% of GDP.
According to Finance Minister Zdravko Maric, the budget is based on the estimate that this year GDP will grow by 2%, after gaining 1.6% last year.
"The structure of the budget and the prime minister's and finance minister's message clearly show that the draft 2016 budget primarily focused on reducing the deficit and putting further public debt growth under control," said Davor Majetic, HUP Director General.
Majetic said that the biggest risk of the budget execution was the projected economic growth and projected revenues from the activation of state-owned property. Under the 2016 budget, the sale of nonfinancial assets is expected to bring HRK 603 million.
"Cuts realised through this budget have been made following the principle "a nip here and a tuck there", so this is probably the maximum that could have been achieved," Majetic said.
He believes that significant changes in the structure of budgetary expenditures and savings are possible only with the reform implementation and serious changes in the modus operadi of all budgetary beneficiaries.
The HUP said it was encouraged by the prime minister's announcements that reforms would follow indeed, adding that it was waiting for them impatiently.
The HGK said the draft 2016 budget represented the beginning of a systematic work on fiscal consolidation and on a sustainable fiscal system. The HGK sees the planned savings as a square one for further reform moves. The association also said that a deficit which is within the Maastrich criteria and the stopping of a further growth of the public debt share in GDP were good measures, but that the acceleration of reforms must follow.
"There are no significant changes on the revenue side of the budget as there are no corrections in the tax system for now, while progress is visible in the expenditure side of the budget, namely in the structure of the budgetary consumption, however not visible enough due to a lack of efficiency in the implementation of structural reforms which would enable a sustainable reduction of consumption," the HGK said.
The HGK sees the draft budget as the beginning of a systematic work on fiscal consolidation and a sustainable fiscal system.
The HGK also said that government efforts invested in strengthening fiscal consolidation were justified which would bring the deficit this year to 3% of GDP and contribute to resolving the public debt issue.
The HGK also said that the planned proportions of the draft budget were mostly within in the frameworks which maintain the necessary balance between fiscal savings and the need not to jeopardise the already fragile economic recovery of the country by consolidation implementation.
The budgetary deficit reduction and the share of the deficit in GDP is based on GDP growth of 2% and on a combination of growth of budgetary revenues and maintaining budgetary expenditures financed from general sources at the 2015 level.
The HGK said that budgetary expenditures amounting to 122.4 billion kuna keeps the budget big.