ZAGREB, September 14, 2018 - During a government meeting in Pula on Thursday, Finance Minister Zdravko Marić reported that in the first six months of the year the central government generated a budget surplus of 1.6 billion kuna, assessing this as a good result in line with what was achieved last year.
Presenting a draft report on the execution of the state budget in the first half of 2018, Marić said that the state budget recorded a deficit of 1.9 billion kuna, which is a little higher on the year.
However, he underscored, when the central government's second and third budget tiers are added, that is local government units and extrabudgetary beneficiaries, which all generated surpluses, then the central government budget surplus for the first six months amounts to 1.6 billion kuna.
"That is a good result, in line with what we achieved in the entire year last year which, among other things, was one of the main reasons why we exited the excessive deficit procedure, which led to our credit rating and outlook being upgraded as well as generating significant savings on interest costs," Marić said.
He recalled that this time last year was the first time a budget surplus had occurred, amounting then to 35 million kuna.
With regard to budget revenue in H1, which amounted to 59.9 billion kuna, that is an annual increase of 2.9%.
With reference to tax revenue, which is the most significant part of the overall budget, Marić recalled that as of 1 January the central state budget had entirely forfeited income tax, leaving that to local and regional government, which is one of the main reasons for tax revenue rising by just 0.8%. He noted this as the reason for the state budget recording a somewhat higher deficit of 1.9 billion kuna.
An amount of 22.5 billion kuna was generated from Value Added Tax (VAT) which is 4.9% more than for the same period last year. On the other hand, profit tax revenue dropped by one percent to 4.9 billion kuna.
Revenue from special taxes and excises amounted to 7.1 billion kuna, which is a jump of 7.3% on the year. The highest increase being for excises on tobacco products, which was up by 22.5%.
Revenue from vehicle tax, which was the subject of one of the biggest changes to tax reliefs, fell by 4%. However, Marić expects that by the end of the year that trend will be corrected. Revenue from contributions grew by 7.5% to 12.2 billion kuna.
Expenditures in the first six months of the year amounted to 61.8 billion kuna, 3.3% more y-o-y. Expenditures for employed persons amounted to 13.6 billion kuna, 750 million kuna more on the year. Material costs amounted to 5.4 billion kuna or 130 million kuna more y-o-y.
Financial expenditure, i.e. interest, was reduced to 4.8 billion kuna in H1, which is a decrease of 363 million kuna compared to H1 2017.
Expenditures for subsidies amounted to 3.5 billion kuna, of which 2.4 billion kuna was for the agricultural sector. The state paid out 6.6 billion kuna for foreign aid, 1.6 billion kuna to the EU budget, 1.5 billion kuna was transferred to the Croatian Health Insurance Fund and 1 billion kuna was paid in fuel subsidies to the road authority.
When it comes to allowances for citizens and households, as the most significant item on the expenditure side, they amounted to 23.7 billion kuna, of which 19.4 billion kuna was for pension allowances.
Welfare allowances amounted to 1.1 billion kuna, while 768 million kuna was paid for additional maternity leave and one-off payments for newborns, which is an increase of almost 200 million kuna compared to last year.
Marić noted that the economy grew by 2.7% in H1, significantly impacted by the retail sector with an increase of 3.9%. The construction sector jumped by 3.0%, while industrial production was a little weaker, increasing by 0.4%. Commodity exports recorded a growth of 2% and imports grew 5.5%.
Prime Minister Andrej Plenković noted that the country is now just one step below investment rating. "If we were to skip that one step, then the interest rate being paid on the international or domestic financial markets would be significantly less and that would naturally be felt in loans for citizens and entrepreneurs," Plenković said.
He added that it was necessary to continue with this responsible policy because that is a message of reliability and credibility in the government and the way it handles public finances and taxpayers' money.
After the government meeting, representatives from the ministries of interior affairs, public administration, agriculture, construction and physical planning, and the sea, transport and infrastructure said that several agreements, decisions and contracts that were of significance to Istria County, the City of Pula and other cities and towns in the county were signed during the cabinet session in Pula.
