The Croatian government expects GDP to stagnate at the zero growth rate this year, after which it should gradually pick up to 1.8% in 2013, 3% in 2014 and 3.5% in 2015, according to economic and fiscal policy guidelines for the 2013-2015 period that were adopted on Thursday.
Investments in the public sector in the first half of the year had no major effect, but we can achieve zero growth this year provided we kick-start investments, Finance Minister Slavko Linic said at the government meeting.
In the economic and fiscal policy guidelines, the government revised down its growth projection for this year from 0.8% to zero. Macroeconomic projections indicate a deceleration of the inflation rate, which is expected to range between 2% and 3% in the 2013-2015 period.
The guidelines are focused on ensuring compliance with the Fiscal Responsibility Act, further cost-cutting measures and reduction of budget expenses, as well as on speeding up structural reforms, Linic said.
Budget revenues for 2013 are projected at HRK 112.7 billion, an increase of 3.4% in comparison with this year, while expenditures are planned at HRK 122.3 billion, which is 2.9% more than this year.
Linic said that in light of Croatia's accession to the European Union next year the government planned to annul the zero VAT rate at the start of 2013 and introduce a new VAT rate of 5%. He also announced the introduction of a property tax, and said that a billion kuna was expected from the fiscalisation process next year.
2013 will continue to see a reduction of health insurance contributions, from 13% to 12%, while state subsidies will increase by some HRK 800 million to HRK 6.2 billion, which Linic said was necessary to consolidate the shipyards.
Linic said that the government was unable to lower the budget deficit below 3% without changing the expenditure policy, adding that the guidelines complied with the provision of the Fiscal Responsibility Act to reduce the general budget expenditure in GDP by 1%.
He mentioned the problem of debt refinancing in light of higher liabilities in 2013 and the need to finance the deficit of 3% of GDP. He said that public debt was expected to be higher also because of assumption of the shipyards' debts.
Public debt is expected to rise from 46.7% of GDP in 2011 to 51.7% in 2012 and further to 52.9% in 2013, after which it should start to fall to 52.6% in 2014 and on to 51.5% in 2015.
