EC warns Croatia of overspending in 2024 draft budget plan

Therefore, the Commission has invited the Adriatic country to take the necessary measures within the national budgetary process to ensure that fiscal policy in 2024 will align with the recommendation, the EU executive said in a press release last week.

According to the Commission 2023 autumn forecast, Croatia’s net nationally financed primary expenditure is projected to increase by 10.4% in 2024, which is above the recommended maximum growth rate.

“This excess spending over the recommended maximum growth rate in net nationally financed primary expenditure corresponds to 2.1% of GDP in 2024. This risks being not in line with what was recommended by the Council,” it added.

Moreover, the Council recommended that Croatia take action to wind down the emergency energy support measures in force, using the related savings to reduce the government deficit, as soon as possible in 2023 and 2024. The Council further specified that, should renewed energy price increases necessitate new or continued support measures, Croatia should ensure that these were targeted at protecting vulnerable households and firms, fiscally affordable, and preserve incentives for energy savings.

According to the Commission 2023 autumn forecast, the net budgetary cost of energy support measures is projected at 1.8% of GDP in 2023, 0.5% in 2024 and 0.1% in 2025. In particular, the electricity and gas price caps measures are legislated to remain in force until the end of March 2024. If the related savings were used to reduce the government deficit, as recommended by the Council, these projections would imply a fiscal adjustment of 1.3% of GDP in 2024, whereas net nationally financed primary expenditure provides an expansionary contribution to the fiscal stance of 1.5% of GDP in that year.

“The energy support measures are not projected to be wound down as soon as possible in 2023 and 2024, as the size of the measures remains relatively high in the first quarter of 2024,” the Commission said.