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Croatia swings to general government deficit of 7.4%/GDP in 2020

Author Annie Tsoneva
Croatia swings to general government deficit of 7.4%/GDP in 2020 Photo: Croatian central bank

ZAGREB (Croatia), October 21 (SeeNews) - Croatia swung to a consolidated general government budget deficit of 27.851 billion kuna ($4.3 billion/3.7 billion euro) in 2020, equivalent to 7.4% of the estimated gross domestic product (GDP) for last year, following a surplus of 1.202 billion kuna, or 0.3% of GDP in 2019, the country's statistical office said on Thursday.

In 2018, the surplus amounted to 864 million kuna, or 0.2% of GDP, while in 2017, the surplus was equal to 2.804 billion kuna, or 0.8% of GDP, the statistical office said in its excessive deficit procedure report, revising its earlier figures for 2017, 2018 and 2019 .

The general government budget deficit in 2020 was fuelled by a deficit of 21.982 billion kuna, or 5.8% of GDP, in the achieved working balance of the state budget, the statistical office said. “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 decrease in tax revenues and social contributions,” it added.

In 2020, collected taxes on production and imports totalled 70.704 billion kuna, which was a decrease of 13% compared to 2019, while the current taxes on income and wealth were collected in the amount of 24.719 billion kuna, 7.4% lower than in 2019. Furthermore, net social contribution revenues amounted to 45.069 billion kuna, which was 4.8% less than in 2019.

The fiscal surveillance of the European Union over the member states is based on the countries' excessive deficit procedure reports, as 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.

Croatia's consolidated debt rose to 330.229 billion kuna, or 87.3% of GDP at the end of 2020, compared with 293.210 billion kuna, or 71.1% of GDP, a year earlier.

In 2018, the country's debt totalled 286.584 billion kuna, or 73.3% of GDP, while in 2017, it was 285 425 billion kuna, or 76.7% of GDP, according to the statement.

Meeting the Maastricht convergency criteria is among the conditions for euro adoption. Croatia which has been a member of the European Union since July 1, 2013, entered last year the Exchange Rate Mechanism (ERM-2), seen as the euro waiting room, and hopes to be ready to join the eurozone on January 1, 2023.

(1 euro=7.512 Croatian kuna)