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EU Council urges Croatia to curb net expenditure growth in 2025

Jun 19, 2024, 4:06:13 PMArticle by Annie Tsoneva
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June 19 (SeeNews) - The Council of the European Union said on Wednesday that Croatia needs to curb the increase of net expenditure next year.

EU Council urges Croatia to curb net expenditure growth in 2025
Zagreb. Source: The Croatian National Tourist Board

"In line with the requirements of the reformed Stability and Growth Pact, [Croatia has to] limit the growth in net expenditure in 2025 to a rate consistent with maintaining the general government deficit below the 3% of GDP treaty reference value and keeping the general government debt at a prudent level over the medium term," the Council of the EU said in recommendations on the economic, social, employment, structural and budgetary policies of Croatia for 2024 and 2025.

Net expenditure means government expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of the Union fully matched by revenue from Union funds, national expenditure on co-financing of programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs and other temporary measures.

According to the Commission Spring 2024 Forecast, Croatia’s net nationally financed primary expenditure is projected to increase by 14.4% 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 3.6% of GDP in 2024. This risks being not in line with what was recommended by the Council," the Council said.

The Council also urged the Adriatic country to submit on time the medium-term fiscal-structural plan.

Croatia should strengthen administrative capacity to manage EU funds, accelerate investments and maintain momentum in the implementation of reforms, according to the Council.

The Council considers that to strengthen its competitiveness, Croatia has to boost access to diverse sources of financing and promote capital markets facilitating the participation of retail investors in the bond market, and addressing barriers to listing and strengthening corporate governance to improve the attractiveness of the stock market.

The country has to reduce labour and skills shortages by strengthening basic skills, enhancing upskilling and reskilling, and improving access to formal home- and community-based long-term care. Croatia also has to address the fragmentation of public institutions that carry out research, development and innovation activities, it added.

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