2021 budget projected with deficit at 2.9% of GDP

2021 budget projected with deficit at 2.9% of GDP

2021 budget projected with deficit at 2.9% of GDP Izvor: Dusko Jaramaz/PIXSELL, Ilustracija

Finance Minister Zdravko Maric on Thursday outlined the proposed 2021 budget with its revenue side totalling HRK 147.2 billion and expenditures of HRK 157.7 billion, whereby the budget's gap will be reversed to a sustainable level of 2.9% of GDP.

After the economic contraction of 8% in 2020, the government has forecast a positive economic growth of 5% in 2021, 3.4% in 2022 and 3.1% in 2023.

"From these figures we can conclude that according to our estimates full economic recovery can be expected at the end of 2022 for certain components of GDP, some will spill over into early 2023," Maric underlined, during a cabinet meeting.

This is the baseline scenario while the downward risks to achieve it are related to the further developments with the pandemic and a vaccine being found and the consequent effects to the economy and budget, said Maric.

Based on individual components of GDP, the government has forecast a growth in personal consumption of 2.6%, government spending of 0.5%, gross fixed capital formation by 0.8% and a 9.8% increase in the export of commodities and services. At the same time it expects the import of commodities and services to fall by 8.9%.

Increase in budget revenue by 12.3% and expenditure by 1.3%

Total budget revenue for 2021 is planned at HRK 147.26 billion, which is 12.3% more than what has been planned during the proposed budget revision for this year.

Tax revenue next year could be HRK 79.5 billion or 10.4% more than this year while contributions could rise 8.4% to HRK 24.6 billion.

A marked growth is expected in the grants which should increase by 29.4% to almost HRK 25 billion.

Total expenditure will amount to HRK 157.7 billion or 1.3% more than this year so the budget deficit is estimated at HRK 10.66 billion.

The general government deficit according to ESA 2010 methodology will amount to HRK 11.56 billion which is 2.9% of GDP after this year's deficit of HRK 29.5 billion or 8%. The government plans to continue narrow the government budget deficit in the next two years to 2.1% and to 1.6% respectively.

Maric underlined that in 2021 HRK 2.1 billion is planned from EU funds for COVID measures,while sources that impact government spending from the budget will amount to HRK 100 million, as an outlay for that purpose. This year HRK 8.1 billion in expenditure is planned for COVID measures, HRK 5.4 billion of which has come from the sources that impact the general government budget.

(€1 = HRK 7.5)

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