Croatian Parliament Agrees On 2009 Budget

by Ulrika Lomas, Tax-News.com, Brussels

10 December 2008

Croatia’s government approved a ‘riskier’ draft of the 2009 budget on Friday; the previously expected ‘balanced’ budget was scrapped in favour of higher spending. Analysts say the increase in state debt leaves the Croatian economy more exposed to the deepening downturn.

The budget brought unexpected twists: the 6% salary increase for public and state services was given after all, following an appeal from the unions; and the government also dropped plans to impose an added tax on cigarettes, which was supposed to fund improvements to the health sector.

The budget gap will amount to 1.6% of GDP, up from this year’s expected 1.3%. Expenditure in 2009 was pencilled in at HRK128.9bn (USD22.78bn) an increase of HRK7.9bn on 2008. Government revenue is expected to yield HRK124.6bn next year.

Croatian Finance Minister Ivo Sanader spoke to reporters after delivering his proposals:

"The reasons why we have to run a deficit instead of a balanced budget are an increased wage bill and the health sector reform."

The proposals will come before Parliament on December 15.

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