Croatia cuts deficit as revenues flood in

ZAGREB (Reuters) – The Croatian government has proposed a cut in this year’s budget deficit to 2.6 percent of gross domestic product thanks to a 2.5-billion-kuna ($465.3 million) budgetary windfall, state radio reported. It said ministers will also propose using the money to prop up the ailing health service and other key sectors. The original budget gap was projected at 2.8 percent of GDP, down from 3.0 percent in 2006. Prime Minister Ivo Sanader’s government has made considerable fiscal efforts since taking office in late 2003, when the budget deficit was 6.3 percent. Due to strong economic activity and revenue overperformance in the first five months, the Finance Ministry said revenues were 15 percent higher than planned, while expenditures were at the expected level. «Tendencies are such that Croatia can count with a zero deficit, or even a surplus, in two to three years,» Finance Minister Ivan Suker said after meeting employers and trade unions on Monday. The government – which faces a general election in November – will spend half of the surplus, or 1.2 billion kuna, on paying arrears in the ailing public health sector, which has been piling up losses for years, the radio said. Croatia hopes to join the European Union around 2010 and is making efforts to keep the fiscal gap in line with EU standards of below 3.0 percent of GDP.

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