"It remains to be seen if it is possible to collect those revenues against a backdrop of various forecasts about a recession in our neighbourhood and downward risks for the Croatian economy," the minister told the parliament at the beginning of a debate on the government's budget proposal for this year.

The main characteristic of those revenues in comparison to the last year is that they rise by 600 million kuna thanks to a higher share of revenues from European Union funds, Linic said.

He recalled that Croatia's inflation in 2012 was projected at 2.4 percent but that the government, nevertheless, planned economic growth.

The government is set to launch new investments and investment activities so as to make sure that there is economic growth, the minister said, adding that that was the reason for the Cabinet led by Prime Minister Zoran Milanovic to project a growth rate of 0.8 percent.

The potential to generate economic growth will be sought through state investments, he said, adding that all ministries would have to activate mechanisms to encourage state companies to invest into energy, transport, tourism, regional development and notably into public utility projects in local self-government units.

He recalled that revenues from the higher Value Added Tax would be used to ease the burden on the economy and to help the social welfare system.

The government also introduced lower VAT rates on some food and on water bills in order to offset the higher costs of living.

"We have also seen that it is imperative to change the nontaxable parts of the income of workers and pensioners, which is why we have raised the nontaxable part of salaries from HRK 1,800 to 2,200 and the nontaxable part of pensions from HRK 3,200 to HRK 3,400," Linic said.

As for budgetary expenditures, Linic said the government had decided to cut them by four billion kuna.

The minister went on to say that the government had undertaken a set of control mechanisms and decided to overhaul the the state administration in a bid to improve the monitoring of budget spending.

As for the fiscal deficit, the minister said that it was below HRK 10 billion. "This is 5 billion kuna less than the (deficit) registered in 2011. The deficit requires new borrowing which is why the government has made it clear that it wants to privatise some state companies," he said.