18:14 / 28.10.2021.

Author: Domagoj Ferenčić

Government adopts proposed 2022 budget and budget revision for 2021

PM Plenković

PM Plenković

Foto: Davorin Visnjic / PIXSELL

As to be expected given the restrictive coronavirus measures, this year expenditures are growing faster than revenues. This has resulted in a rising deficit in spite of GDP growth of 9%, which is well above the initial forecast growth of 5.2%.

At Thursday's cabinet session, government adopted its proposed budget revision for this year, as well as its proposed budget for 2022. Prime Minister Andrej Plenković laid out the numbers for the 2021 budget revision: “Total revenues are being increased by 3.3 billion Kuna, to 153.6 billion, while expenditures are being raised by six billion, so 173.3 billion Kuna. We expect the state budget to have a deficit of 19.7 billion Kuna, or 4.7 percent of GDP, while the state in general will have a deficit of 4.5 percent of GDP. We also expect that the public debt as a portion of GDP will be reduced by 4.2 percent when compared to last year.”

The bulk of the revision was directed towards the Defense Ministry, to pay for the first installment of the twelve fighter jets it has agreed to buy from France, and the Health Ministry. As a point of reference, the total of COVID-crisis related budget costs is in excess of 40 billion Kuna, or roughly 5.3 billion Euros.

Deputy Prime Finance Minister and Finance Minister Zdravko Marić had this to say about the proposed budget for 2022: Total revenues for next year are projected at 164.5 billion Kuna. The biggest increase in terms of expenditures deal with the earthquake reconstruction effort.”

Meanwhile, Prime Minister Plenković announced today that as of January 1st the minimum wage in Croatia should be higher by 350 Kuna, or roughly 47 Euros, which should affect more than 50 thousand workers: “We have decided that under these economic circumstances we will raise the minimum wage from the current 3 400 Kuna to 3 750 Kuna. This means a take home salary of 500 Euros.”

And while unions are happy with the proposed hike in the minimum wage, they still feel that overall wages in Croatia are for the most part too low. The president of the Union of Autonomous Trade Unions of Croatia, Krešimir Sever: “The problem is that however high its portion, be it 50 percent of the average and 60 percent of the median wage, the actual Kuna amount is still too small. That and the fact that prices are still rising much faster than salaries.”

However, employers are less enthused, noting that the cost is once again being forced on them. They are calling for compensatory measures such as reduced contributions and tax breaks for vulnerable sectors. Branka Prišlić from the Glas Poduzetnika Entrepreneurs Association: “We have to strive to have five thousand Kuna fall within the non-taxable portion of income. But also to have Income Tax at a flat rate of ten percent, and not the current bracket system of ten to thirty percent.”

The proposed amendments to the Minimum Wage Act also sparked a heated debate in Parliament. While the ruling majority noted that a 350 Kuna increase in the minimum wage would be the largest single increase so far, the opposition claims that even the average Croatian salary is not enough to live on, much less the minimum wage.

Source: HRT

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