In the introduction to the Government session on Thursday, Prime Minister Andrej Plenković announced that this year's budget revision will increase budget revenues by 6.6 billion kuna and expenditures by 10.9 billion kuna, thus the projected budget deficit will be increased from the originally planned 2.6 to 2.8 percent.
“The rebalance proposal takes into account the energy crisis, the agreement with unions on the growth of the salary base from May 1, and health-related expenditures,” said Prime Minister Andrej Plenković at the beginning of the government session.
As he pointed out, they are now forecasting real GDP growth of 3 percent this year, with a key contribution expected from exports of goods and services and gross investments into fixed capital. He also recalled that the Government expects acceleration of consumer price inflation to 7.8 percent this year, which will be strongly contributed to by rising prices in food, oil and other inputs in agricultural production, as well as the dynamics of food prices in the global and EU markets.
According to him, with the amendments to the state budget for 2022, total revenues will increase by 6.6 billion kuna or 4 percent, to 171 billion kuna.
“The revenue side of the budget is determined by further growth of economic activity, efforts to mitigate the effects of inflationary pressures on citizens and the economy, primarily by reducing VAT rates on certain products and temporarily reducing excise duties on certain energy sources, as well as accelerated withdrawal of EU funds from the EU budget and the EU New Generation instrument as well as the Solidarity Fund,” said Plenković.
Total budget expenditures, on the other hand, are increasing by 10.9 billion kuna, meaning in the rebalance they are planned to amount to 184.7 billion kuna.
“The goal of the rebalance is to meet certain expenditures, primarily the functioning of the health and pension system, meaning the settlement of debts in health care institutions and the indexation of pensions,” said the Prime Minister.
“Expenditures also include remediation of the security situation in Europe due to the aggression against Ukraine, adequate reception and care of Ukrainian refugees, provision of gas supplies, procurement of goods, and an increase of the base for calculating salaries in state and public services by 4 percent from May 1, 2022, as well as providing funds for measures to mitigate the growth of energy prices, including subsidizing the price of gas and compensation for vulnerable energy consumers,” said Plenković.
He stressed that after the rebalance, the general government budget according to the ESA 2010 methodology will record a deficit of 2.8 percent of GDP in 2022, which is 0.3 percentage points more than originally projected, but still below 3 percent, determined by Maastricht criteria. The share of public debt in GDP, on the other hand, will decrease by 3.6 percentage points compared to the previous year and will amount to 76.2 percent of GDP.
The state budget for 2022, adopted by Parliament on December 8, 2021, projected revenues of 164.5 billion kuna, expenditures of almost 173.8 billion and a budget deficit above 9 billion or 2.6 percent of GDP.
In the context of European issues, Prime Minister Plenković recalled Europe Day, which was marked at the beginning of the week.
“The Commission has approved an additional €700 million for the implementation of the National Recovery and Resilience Plan. We met 34 indicators by the end of 2021. The Commission evaluated them positively. We are the fifth EU country to receive a positive assessment from both the Commission and the Council. We are working to meet criteria by June 30 for the second installment and when we meet them we expect an additional €700 million in the second half of the year,” he said.
He also commented on the introduction of the euro.
“We held a session of the National Council for the Introduction of the Euro on Wednesday. We also talked about the broader context, rising energy and food prices and everything we are doing to make it easier for citizens. In this crisis, our membership in the Eurozone is a plus and will help us overcome all the challenges ahead in this crisis situation,” said the Prime Minister.
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