"This budget is realistic. It is geared towards development and protecting those hit hardest by the crisis," Prime Minister Zoran Milanovic said at a Cabinet meeting. "We believe these measures will stimulate growth and development in Croatia," he added.
The PM said budget savings would actually amount to HRK 4 billion, considering the fact that the government was planning to withdraw 600 million kuna more from European Union funds this year. Finance Minister Slavko Linic explained that those were non-repayable funds that would not affect the budget deficit.
The budget deficit is planned at HRK 9.9 billion, or 2.8% of GDP. With 0.2 percent deficits of extra-budgetary users and local government units added to the amount, the projected general government deficit is likely to account for 3.3 percent of GDP.
The government projected this year's economic growth at 0.8% and inflation at 2.4%.
Both the premier and the finance minister recalled that the government guidelines had previously put savings at HRK 4.6 billion, however, savings envisaged by the draft budget were 600 million kuna lower.
Presenting the budget, PM Milanovic said that the budget "is a mirror of the government's policy, plans and views".
He said that he believed the proposed measures would encourage growth and development.
Finance Minister Linic said that benefits such as children's allowances, maternity allowances and welfare benefits would not be curtailed.
The government cut expenditure on public-sector employees by HRK 1.95 billion to HRK 21.3 billion.
Material expenditure was reduced by HRK 317 million to HRK 8.8 billion and expenditure on subsidies was cut by HRK 933.5 million or 14.6 percent to HRK 5.5 billion. The Croatian Railways (HZ) company can expect state aid to be reduced by 543 million.
Subsidies to agriculture were reduced by 817 million to HRK 2.8 billion.
The financial expenses are put at 8 billion kuna, with an increase of HRK 322.1 million.
Some 23 billion kuna is required to finance the state and extra-budgetary funds this year, including two billion kuna to be secured through privatisation, and the rest through borrowing on domestic and foreign markets.
The government plans to privatise the Croatia Osiguranje insurer, retaining the state's stake of 25 percent plus one share in the company and announcing a public tender for privatisation.
As for Hrvatska Postanska Banka, the government is planning to recapitalise the bank with funds from the European Bank for Reconstruction and Development and sell its shares in the bank, which it believes may be interesting to pension funds.