By Igor Ilic
ZAGREB, Nov 21 (Reuters) - The Croatian government adopted on Saturday the 2010 budget proposal reducing the gap it has to plug to 2.5 percent of gross domestic product from close to three percent targeted this year.
The expenditures will remain virtually flat amid an expected marginal economic recovery of 0.5 percent after this year's expected contraction of between five and six percent.
The planned revenues are seen 1.5 percent up from 2009 at 112.8 billion kuna ($22.91 billion).
The expenditures, which have been steadily expanding each year in this decade, are planned at 121.4 billion kuna.
'The consolidated budget deficit, including also local authorities and state agencies, will amount to 2.7 percent of GDP, a touch above the central government's budget gap,' Finance Minister Ivan Suker told a cabinet session.
Parliament has to approve the 2010 budget by mid-December.
The government also adopted fiscal projections for the next three years targeting the budget gap of 1.8 percent of GDP in 2012 on growth rising to 3.5 percent.
Prime Minister Jadranka Kosor told the session the biggest budget cuts for next year, worth 1.2 billion kuna, were planned in subsidies.
'Our budgetary projections indicate our intention to reform public administration, give a boost to the private sector and reduce subsidies. We want to improve management of the public funds,' Kosor said.
STRUGGLING
Most analysts welcomed the government's intention to tame expenditures -- which will rise only 900 million kuna from this year due to costs related to Croatia's European Union accession process -- but voiced concern the plan would be feasible.
In a recent Reuters poll of 11 local analysts, they put on average the GDP decline in 2010 at 0.9 percent which will mean less revenues in state coffers than the government plans.
Also, the costs of privatisation of the loss-making shipbuilding industry are not included in the budget proposal. As a part of its EU drive Croatia has to cut high state subsidies to shipyards and has agreed with the European Commission to sell them.
However, the first tender in September fell through and if another attempt to sell the docks fails, the shipyards face bankruptcy and the government may need to take over their debt worth billions of kuna for which it had issued state guarantees.
Croatia, a heavily indebted European Union candidate which hopes to wrap up entry talks next year and join in 2012, is struggling to keep public expenditures under control and revive an economy battered by recession and slow structural reforms.
Croatia's foreign debt amounts to more than 40 billion euros ($59.41 billion), surpassing 90 percent of GDP. The government had to tap international financial markets twice this year to collect funds for to cover the budget gap and service maturing domestic and foreign debts.
Croatia will need some two billion euros in 2010 to service maturing debt and additional 8.6 billion kuna to cover the budget gap, and Suker said it would seek funds both at the local and foreign financial markets.
In May the government issued a bond worth 750 million euros and this month it raised $1.5 billion on the U.S. market.
Analysts say Croatia needs stronger fiscal consolidation to cut costs and open more breathing space for the private sector.
This year banks have largely extended loans to government at the expense of the private sector, putting additional pressure on local businesses seeking funds to drive the economy forward.
(Editing by James Jukwey) ($1=4.924 Croatian Kuna) ($1=.6733 Euro) Keywords: CROATIA BUDGET/ (igor.ilic@reuters.com; +385 1 4899970; Reuters Messaging: igor.ilic.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
ZAGREB, Nov 21 (Reuters) - The Croatian government adopted on Saturday the 2010 budget proposal reducing the gap it has to plug to 2.5 percent of gross domestic product from close to three percent targeted this year.
The expenditures will remain virtually flat amid an expected marginal economic recovery of 0.5 percent after this year's expected contraction of between five and six percent.
The planned revenues are seen 1.5 percent up from 2009 at 112.8 billion kuna ($22.91 billion).
The expenditures, which have been steadily expanding each year in this decade, are planned at 121.4 billion kuna.
'The consolidated budget deficit, including also local authorities and state agencies, will amount to 2.7 percent of GDP, a touch above the central government's budget gap,' Finance Minister Ivan Suker told a cabinet session.
Parliament has to approve the 2010 budget by mid-December.
The government also adopted fiscal projections for the next three years targeting the budget gap of 1.8 percent of GDP in 2012 on growth rising to 3.5 percent.
Prime Minister Jadranka Kosor told the session the biggest budget cuts for next year, worth 1.2 billion kuna, were planned in subsidies.
'Our budgetary projections indicate our intention to reform public administration, give a boost to the private sector and reduce subsidies. We want to improve management of the public funds,' Kosor said.
STRUGGLING
Most analysts welcomed the government's intention to tame expenditures -- which will rise only 900 million kuna from this year due to costs related to Croatia's European Union accession process -- but voiced concern the plan would be feasible.
In a recent Reuters poll of 11 local analysts, they put on average the GDP decline in 2010 at 0.9 percent which will mean less revenues in state coffers than the government plans.
Also, the costs of privatisation of the loss-making shipbuilding industry are not included in the budget proposal. As a part of its EU drive Croatia has to cut high state subsidies to shipyards and has agreed with the European Commission to sell them.
However, the first tender in September fell through and if another attempt to sell the docks fails, the shipyards face bankruptcy and the government may need to take over their debt worth billions of kuna for which it had issued state guarantees.
Croatia, a heavily indebted European Union candidate which hopes to wrap up entry talks next year and join in 2012, is struggling to keep public expenditures under control and revive an economy battered by recession and slow structural reforms.
Croatia's foreign debt amounts to more than 40 billion euros ($59.41 billion), surpassing 90 percent of GDP. The government had to tap international financial markets twice this year to collect funds for to cover the budget gap and service maturing domestic and foreign debts.
Croatia will need some two billion euros in 2010 to service maturing debt and additional 8.6 billion kuna to cover the budget gap, and Suker said it would seek funds both at the local and foreign financial markets.
In May the government issued a bond worth 750 million euros and this month it raised $1.5 billion on the U.S. market.
Analysts say Croatia needs stronger fiscal consolidation to cut costs and open more breathing space for the private sector.
This year banks have largely extended loans to government at the expense of the private sector, putting additional pressure on local businesses seeking funds to drive the economy forward.
(Editing by James Jukwey) ($1=4.924 Croatian Kuna) ($1=.6733 Euro) Keywords: CROATIA BUDGET/ (igor.ilic@reuters.com; +385 1 4899970; Reuters Messaging: igor.ilic.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.