Commerce Chamber: Expected GDP Growth of 3.2% is Feasible

The Croatian Chamber of Economy (CCE) rated government guidelines for the 2017 state budget as a solid framework that places public finances in the function of tax alleviation of businesses and citizens, while the economy growth was rated as optimistic, but feasible

The government announced on Monday guidelines for the 2017 state budget and projections for 2018 and 2019, defining the direction and goal of economic policy as a basis for the upcoming state budget.

“Building upon positive advances in this year, marked by economic growth and significant fiscal consolidation, the guidelines predict the continuation of such tendencies in the upcoming period,” CCE analysts stated.

The GDP growth in 2017 is expected to be 3.2 percent, with a deficit reduction of the consolidated state budget to 1.6 percent of GDP, with a continuing decline of public debt in GDP to under 85 percent.

“In general, this is a quality approach using the fiscal space generated by economic growth to implement tax reform in the volume that would not jeopardize budget proportions important for the state to be removed from the excessive deficit procedure,” the comment cited.

In this context, the realization of the predicted economic growth and connected budget income is becoming an important factor of consistency of the budget framework, especially in circumstances where a slight increase of budget expenditure is planned, by 4.7 billion kuna compared to the rebalancing of the current budget.

In that sense the GDP growth projection is feasible, but more optimistic than the European Commission and other relevant institutions estimate.

They also mention the guidelines for the predicted growth of expenditures cites the importance of enforcing deeper structural reform that would enable a cheaper and more efficient state and restructuring of state spending towards areas that entice economic activity and create a presumption of sustainable development.

“Even more as quality solutions connected to the sustainability of the health and pension system and public companies efficiency are missing,” the CCE stated.

They also rate “guidelines represent a solid framework that finally places public finances in the function of tax alleviation of businesses and citizens, securing at the same time needed preconditions for shaping state debt and deficit into sustainable framework that creates the possibility of exiting excessive deficit procedure with a favourable effect on the credit rating of the country.”

“We expect the guidelines to form a framework which will continue and advance the implementation of structural reform with a goal of effectively using the period of expanding monetary policy and low interest rates and a large amount of available EU funds to perform structural changes, increase investments, shape public finances, create dynamic economic growth and soften the burden of debt,” the CCE comment stated.