The Croatian Bureau of Statistics issues the general government deficit and debt data based on the figures reported in the Excessive Deficit Procedure Report (the April Notification) for the period from 2017 to 2020 according to the European System of National and Regional Accounts (ESA 2010) methodology and the Manual on Government Deficit and Debt.
The fiscal surveillance of the European Union over the Member States is based on the Excessive Deficit Procedure Report. The Maastricht Treaty defines two main criteria of the fiscal surveillance: a deficit-to-GDP ratio and a debt-to-GDP ratio must not exceed the reference values of 3% and 60%, respectively.
This EDP Report is submitted to the European Commission (Eurostat) twice a year – at the end of March (called the April Notification) and the end of September (the October Notification). The EDP Report refers to the last four-year period and for the current year in which current-year data are based on the Ministry of Finance forecast. National statistical offices are obliged to publish the EDP Report on their web sites.
In 2020, the consolidated general government deficit amounted to -27 499 million kuna, or 7.4% of GDP, while in 2019, the surplus amounted to 1 199 million kuna, or 0.3% of GDP. In 2018, the surplus amounted to 863 million kuna, or 0.2% of GDP, while in 2017, the surplus was equal to 2 796 million kuna, or 0.8% of GDP.
The consolidated debt at the end of 2020 amounted to 329 684 million kuna, or 88.7% of GDP, while in 2019, it amounted to 292 920 million kuna, or 72.8% of GDP. In 2018, the debt amounted to 286 277 million kuna, or 74.3% of GDP, while in 2017, it was 285 108 million kuna, or 77.6% of GDP.
The deficit of -21 982 million kuna, or 5.9% of GDP, in the achieved working balance of the State Budget had a big impact on the deficit amount in 2020, which is a deterioration of 22 032 million kuna compared to the previous year. The reason for such a high deficit of the working balance of the State Budget is the decline in overall economic activity due to the COVID-19 pandemic, which primarily had a significant impact on the tax revenues and social contributions decrease. On the other hand, the Government of the Republic of Croatia has taken significant measures on the expenditure side of the State Budget in order to preserve jobs at employers’ whose economic activity has been disrupted by special circumstances, as well as in order to finance costs to preserve the health of the citizens.
In 2020, taxes on production and import were collected in the amount of 70 704 million kuna, which was a decrease of 13.0% compared to 2019, while the current taxes on income and wealth were collected in the amount of 25 076 million kuna, which was 6.0% lower than in the previous year. Furthermore, net social contribution revenues amounted to 45 069 million kuna, which was 4.8% less than in 2019.
National accounts data on taxes and social contributions are data on government cash receipts adjusted to the concepts of ESA in a way that time-adjusted cash (TAC) method is implemented.
The biggest impact on generating deficit, except State Budget working balance, in 2020 compared to previous years was caused by the significantly worsened financial result of extrabudgetary users and public corporations compared to 2019.The impact on generating deficit was also caused by an increase in other expenditure categories, which also include subsidies payable, social benefits other than social transfers in kind and compensation of employees.
Furthermore, an increase in investments was recorded, which amounted to 20 707 million kuna in 2020, which was 19.2% higher than in 2019. Payments for guarantees called, debt assumptions and capital injections in 2020 were recorded in the amount of 942 million kuna, which influenced an increase in deficit as well as inclusion of stimulating housing expenditures.
In 2020, paid interests amounted to 7 404 million kuna, which was a decrease of 16.9% compared to 2019, when they amounted to 8 907 million kuna.
Compared to the October Notification, the government deficit/surplus for the period from 2017 to 2019 has been revised and the surplus was 159 million kuna lower in 2017, or 0.04% of GDP, while in 2018, the surplus was 100 million kuna lower, or 0.03% of GDP, and in 2019, it was 390 million kuna lower, or 0.10% of GDP. The aforementioned revisions resulted mainly from methodological treatment of stimulating housing, updating of the sector classification, updating of data sources and other minor methodological changes.
Additionally, in accordance with the Manual on Government Deficit and Debt, the general government coverage after the October Notification included public units that give ancillary government services as well as units fallen market/non-market test. They, among others, also include developing agencies, entrepreneur centres, competence centres and other similar ancillary units.
In 2020, the primary deficit of the general government amounted to -20 095 million kuna, or 5.4% of GDP, which was 30 202 million kuna lower than in 2019.
The level of the consolidated general government debt (the so-called Maastricht debt) at the end of 2020 was 36.8 billion kuna, or 12.6% higher than at the end of 2019. Out of that, 32.8 billion kuna was accounted for by net borrowing and the rest by depreciation of kuna exchange rate against euro.
The downsizing trend in Maastricht debt-to-GDP ratio, which began in 2013, was abruptly reversed due to the crisis caused by the COVID-19 pandemic. Therefore, the general government debt-to-GDP ratio in 2020 increased by 15.9 percentage points as compared to 2019 and stood at 88.7%, which was caused by larger borrowing requirement of the government on the one hand and by drop in GDP due to fall in economic activity on the other.
1 REPORTING OF EXCESSIVE GOVERNMENT DEFICIT/SURPLUS AND DEBT LEVELS AND PROVISION OF ASSOCIATED DATA
2 COMPARISON OF APRIL 2021 NOTIFICATION WITH OCTOBER 2020 NOTIFICATION OF GOVERNMENT DEFICIT AND DEBT LEVELS
Basic concepts and definitions
The general government sector (S.13) includes all institutional units that are other non-market producers, whose output is intended for individual and collective consumption and mainly financed by compulsory payments made by units belonging to other sectors and/or all institutional units principally engaged in the redistribution of national income and wealth.
The general government consists of three sub-sectors: the central government (S.1311), the local government (S.1313) and the social security funds sub-sector (S.1314). The central government comprises departments of government administration and other central government agencies, authorities and institutions whose jurisdiction covers the entire economic territory, apart from the administration of the social security funds sub-sector. It also includes non-profit institutions that are controlled and chiefly financed by the central government. The central government in this EDP Report includes central government budgetary users, extra-budgetary users (the Croatian Waters, the Fund for Environmental Protection and Energy Efficiency, the Croatian Roads, the Croatian Privatization Fund until 31 March 2011, the Agency for Management of the Public Property until 30 September 2013, that is, the Restructuring and Sale Center and the State Property Management Administration as its legal successors), the Croatian Railways Infrastructure, the Croatian Radio and Television, Hrvatske Autoceste d. o. o., the Rijeka-Zagreb Motorway together with the Croatian Bank for Reconstruction and Development, the State Agency for Deposit Insurance and Bank Resolution, the Croatian Energy Market Operator and Croatian Regulatory Authority for Network Industries, which have been reclassified into the government sector (the central government).
The local government sector comprises local and regional self-government units as well as all local budget users. Included in the local government sector are also non-profit institutions controlled and chiefly financed by local authorities. The social security funds sub-sector includes all public sector institutional units whose main activity consists in administrating funded social insurance systems. Therefore, it consists of the Croatian Health Insurance Fund, the Croatian Institute for Pension Insurance and the Croatian Employment Institute.
The government deficit (surplus) means the net borrowing/net lending (EDP B.9) of the general government sector (S.13) defined as a difference between a total revenue and a total expenditure.
According to the new ESA 2010 methodology, no further adjustments are made in the treatment of the interest calculation of flows relating to swaps and forward rate agreements, which means that EDP B.9 is now aligned with B.9 according to the ESA 2010.
The general government debt is defined as gross debt nominal value at the year end. The debt refers to the units classified in the general government sector (S.13) according to the sector classification and consists of the following financial instruments: currency and deposits (AF.2), debt securities (AF.3) and loans (AF.4), as defined in the ESA 2010.
|COVID-19||Corona VIrus Disease-19|
|EDP||excessive deficit procedure|
|ESA||European System of Accounts|
|GDP||gross domestic product|
|VAT||value added tax|
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