2011 draft budget envisages highest expenditures for pension, salaries

Next year's draft budget envisages maintaining expenditures at this year's level of HRK 122.3 billion, of which the bulk (HRK 35.1 billion) will go for pensions, HRK 163 million more than this year, and for salaries (HRK 22.6 billion), up 0.1 per cent.

There will be no rise in salaries of budget beneficiaries, the Finance Ministry said on Monday, adding the planned amount ensured 0.5 per cent for past labour and a 2.2 per cent increase for salaries in education and science in July 2011.

Pensioners cannot count on an increase in pensions next year, given that the government has moved a bill stipulating that, like this year, pensions will not be adjusted to the growth of salaries and consumer prices.

Expenditures for adjustment to European Union standards amount to HRK 1.9 billion. "The budget has not been increased by this amount, but expenditures for the state's regular operations have been reduced," said the ministry.

An additional HRK 2 billion has been saved to finance the increase of some expenditures -for finance (an increase of HRK 1.1 billion), for military equipment (HRK 260 million), for maternity allowances (HRK 54 million), for the President's Office (HRK 5 million), for the census (HRK 146 million), and for parliamentary elections and a referendum on EU accession (HRK 177 million).

Costs have been cut in subsidies to Croatian Railways and air traffic. Next year's budget does not envisage subsidies to shipyards.

Asked about possible new state guarantees to the shipyards, the Finance Ministry said Brussels' rules are clear and that the recent guarantees for the 3. Maj shipyard had been agreed before negotiations on the "Competition Policy" policy chapter were opened.

Through the end of last month, the state paid about HRK 800 million in state guarantees, although not all went on shipbuilding, said the ministry.

Next year's draft budget envisages a total of HRK 6.3 billion for subsidies, down 2.7 per cent from this year, with the highest amount envisaged for agriculture and fisheries, HRK 2.9 billion, down 2.5 per cent on the year.

Budget revenues are planned in the amount of HRK 107.4 billion, down 0.8 per cent from this year.

The ministry said this was due to the cancellation of the emergency tax on all incomes, an envisaged income tax decline of 12 per cent, to HRK 1.1 billion, and a 10 per cent decline from profit tax to HRK 5.7 billion, which is nearly half the amounts of 2007 and 2008.

Revenues from Value Added Tax will grow 3.8 per cent to HRK 39.3 billion, while contributions are expected to grow 1.4 per cent, also to HRK 39.3 billion.

With HRK 107.4 billion planned in revenues and HRK 122.3 billion in expenditures, the budget deficit will be HRK 14.9 billion or 4.3 per cent of GDP.

When one adds to that the deficit of extra-budgetary funds (0.4 per cent of GDP) and local government units (0.1 per cent of GDP), the consolidated general government deficit is estimated at 5 per cent of GDP.

(HINA)