ZAGREB, Aug 16 (Hina) - The Economic Council of the Croatian Employers' Association assesses that problems in the public sector are becoming increasingly present in the form of a growing fiscal deficit and an increase in the public
debt. In the July issue of the Ekonomski Monitor monthly, members of the Council stress that regulating public finance with the aim of supporting economic growth and preventing the generating of instability is becoming the main priority of the government's economic policy. The share of revenues in Croatia's Gross Domestic Product is much larger than in other countries in transition. The share of tax revenues in the GDP is above the regional average, their share being an excellent indicator of the tax burden on economy. Croatia's considerable tax burden points to the fact that public finance cannot be consolidated by increasing tax
ZAGREB, Aug 16 (Hina) - The Economic Council of the Croatian
Employers' Association assesses that problems in the public sector
are becoming increasingly present in the form of a growing fiscal
deficit and an increase in the public debt.
In the July issue of the Ekonomski Monitor monthly, members of the
Council stress that regulating public finance with the aim of
supporting economic growth and preventing the generating of
instability is becoming the main priority of the government's
economic policy.
The share of revenues in Croatia's Gross Domestic Product is much
larger than in other countries in transition. The share of tax
revenues in the GDP is above the regional average, their share being
an excellent indicator of the tax burden on economy.
Croatia's considerable tax burden points to the fact that public
finance cannot be consolidated by increasing tax revenues but
rather by reducing expenses. The only exceptions are the levelling
of taxes on different sources of revenues and a more efficient
collection of taxes and contributions through the system of the
state treasury.
Fiscal decentralisation harbours the danger of an increase in the
tax burden, which is why the Council recommends careful monitoring
of the conduct of local authorities.
The overall state spending in Croatia accounts for more than 50% of
the GDP, whereas, according to World Bank data, the average in other
countries in transition is about 40%. Expenses for the salaries of
public sector employees are well above the average. Given the fact
that employment in the civil part of the public sector (not
including the army and police) is not especially high in comparison
to other countries, it follows that the reason for high expenses for
salaries is relatively high average salaries in the public sector
and a relatively high employment rate in the army and police.
The consolidation of the public sector will therefore have to be
conducted toward a more restrictive wage policy for public servants
and the reduction of employment in state segments with surplus
labour.
Croatia also has relatively high expenses for different social
rights, from pension to sick leave allowances as well as various
social bonuses, which points to the need for a reform of the social
care system.
Comparatively low expenses for interest rates prove that Croatia is
not an over-indebted country for now, however, the growth of
interest rates in the GDP in the past several years warns that this
problem might crop up if public finance is not consolidated, the
Council warns.
(hina) rml