Transcript 8112 (6) pempal IJB_en

Ministry of Finance
PEMPAL Budget Community of Practice
A brief overview of the economy of the Republic of
Croatia
Ivana Jakir-Bajo
Zagreb, December 2015
• A BRIEF OVERVIEW OF THE ECONOMY OF THE REPUBLIC OF
CROATIA
1.
2.
3.
4.
Macroeconomic framework
•
GDP
•
deficit
•
differences in the coverage
•
public debt
Excessive deficit procedure
Macroeconomic imbalances procedure
Strategic documents – The Convergence Programme and the National Reform
Programme
• STATE TREASURY SYSTEM
1.
2.
3.
Organisational structure
Budget execution
Comprehensiveness of the budget
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Macroeconomic framework
• During 2014, recession trends continued in the domestic economy for the
sixth consecutive year
• Macroeconomic trends for the year-to-date period indicate a more
favourable performance of macroeconomic indicators than those expected
in previous periods
• After six recession years, gross domestic product achieved a real growth
rate of 0.8% in the first half of 2015, when compared year-over-year.
•
The biggest positive contribution to the gross domestic product growth in the first
half of the year resulted from:
• export of goods and services,
• household consumption and state consumption and
• gross investments in fixed capital
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Macroeconomic framework - GDP growth
2014 Pojection 2015
Projection 2016Projection 2017 Projection 2018
GDP, current prices, mio HRK
328.927
330.683
336.477
344.092 353.967
GDP, real growth (%)
-0,4
0,4
1
1,2
1,5
Household consumption
-0,7
0,5
0,3
0,5
1,1
State consumption
-1,9
-1,2
-1,4
-1
-0,6
Gross investments in fixed capital
-4
-1,3
1,8
3,2
3,6
Export of goods and services
6,3
3,7
4,6
4,8
4,8
Import of goods and services
3
2,8
4
4,5
5
Contributions to GDP growth (percentage points)
Household consumption
-0,4
0,3
0,2
0,3
0,6
State consumption
-0,4
-0,2
-0,3
-0,2
-0,1
Gross investments in fixed capital
-0,8
-0,2
0,3
0,6
0,7
Change in stocks
-0,2
0
0,2
0,2
0,1
Import of goods and services
2,7
1,7
2,2
2,3
2,5
Export of goods and services
-1,3
-1,2
-1,8
-2,1
-2,4
GDP deflator, growth (%)
0
0,2
0,8
1,1
1,4
Consumer price index, growth (%)
-0,2
0,1
1,1
1,3
1,4
Employment, growth (%)*
-0,7
-0,2
0,1
0,8
1,3
Unemployment rate (ILO)
17,3
17,1
16,8
15,9
14,3
* Domestic concept of defining national accounts
Macroeconomic
framework of the
convergence
programme
Source: Croatian Bureau of Statistics, Eurostat, Ministry of Finance
2013
2014
Projection MFIN 2015.–
April 2015
Projection MFIN 2015 –
September 2015
GDP – real growth (%)
-1,1
-0,4
0,4
1,1
Household consumption
-1,8
-0,7
0,5
0,6
State consumption
0,3
-1,9
-1,2
0,4
Gross investments in fixed capital
1,4
-3,6
-1,3
0,7
Export of goods and services
3,1
7,3
3,7
6,8
Import of goods and services
3,1
4,3
2,8
6,1
Higher
expected grow
rates
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Macroeconomic framework - deficit of the general
government
CP RC 2015- 2018 (% GDP)
Total income
Total expenses
Net borrowings
CP RC 2014 - 2017 (% GDP)
Total income
Total expenses
Net borrowings
Difference
Total income
Total expenses
Net borrowings
2014
2015
2016
2017
2018
42,3
48
-5,7
42,9
47,9
-5
43,3
47,3
-3,9
43,7
46,4
-2,7
43,5
45,9
-2,4
43
47,2
-4,2
42,5
45,7
-3,2
42,6
45
-2,4
43,1
45,2
-2,2
-0,7
0,8
-1,6
0,4
2,2
1,9
0,7
2,3
-1,5
0,6
1,2
-0,6
Comparison of total
income,
expenses and deficit of
the consolidated general
government
in the new and previous
Convergence
Programmes shows
significant differences
The differences emanate from:
•different nominal gross domestic product levels,
•applied policies for managing the income and expense sides of the budget and
•application of the new statistical methodology ESA 2010 since September 2014,
which for the first time introduces the statistical coverage of the general government
in the Convergence Programme for the period 2015 - 2018
It should be mentioned that the budget coverage of the general government was used
in the Convergence Programme for the period 2014 - 2017
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Macroeconomic framework - differences in the
coverage
• Budgetary coverage of the general government ≠ statistical coverage
• The European statistical methodology ESA 2010 contains specific rules for
classifying units by institutional sectors of society, among which is the general
government sector with its sub-sectors
• All statistical reports, including the Fiscal report whereby monitoring compliance
with criteria relating to the state deficit and debt, must be submitted to Eurostat by
the coverage of these sectors
•
•
•
this statistical coverage of the general government sector and its sub-sectors in most EU
countries is not identical to the coverage used for budgetary purposes
the source of statistical reporting is accounting information
efforts are aimed at making these coverages as similar as possible, as otherwise they
have to be quantified and significant differences explained
• The most significant differences in the budgetary system of the Republic of Croatia
have been established in the coverage of extra-budget users which, in accordance
with the Registry of budget and extra-budget users is much narrower than sectoral
coverage
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Macroeconomic framework - public debt
• A steep rise in public debt in the past period:
•
•
•
•
noticeable negative economic trends
restructuring of some sectors,
assuming the obligations of public companies and
accumulation of budget shortfalls
Adjustment was also a consequence of switching to the application of the ESA 2010
methodology and including road transport public companies in the general government sector
•
In accordance with the ESA 2010 methodology, social security funds include the Croatian
Pension Insurance Institute, the Croatian Health Insurance Institute and the Croatian
Employment Bureau
%BDP-a
•
Public debt
Public debt(% of
GDP)
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Excessive deficit procedure (EDP)
• The excessive deficit procedure relates to the measures taken by the European
Union in respect of the Member States whose public finances are not in
accordance with rules relating to the size of budget deficits and public debt
• Within this procedure, Member States, in accordance with recommendations given
by the European Commission and the Council of the EU, must adopt and
implement measures that should result in the correction of excessive deficits and
debt and bring them within the envisaged limit until the set deadline
• Following this, Member States shall bring measures to reduce their budget deficits
to an acceptable level
• The European Commission shall assess whether the measures have been taken
and whether they are implemented in an adequate manner
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Excessive deficit procedure (EDP)
Situation relating to the Stability and Growth Pact
Member States, 13 May 2015
No excessive deficit procedures
Austria, Belgium, Bulgaria, Czech
Republic, Denmark, Estonia,
Germany, Hungary, Italy, Lithuania,
Luxembourg, Latvia, Slovakia, the
Netherlands, Romania, Slovakia,
Sweden, Great Britain,
Closed excessive deficit procedure
Malta, Poland
Ongoing excessive deficit procedure
Croatia, Cyprus, France, Greece,
Ireland, Portugal, Slovenia, Spain
Excessive deficit procedure has been tightened and a new
Great Britain
deadline has been set until 2016/2017
Consideration of opening a new excessive deficit
Finland
procedure
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Excessive Deficit Procedure (EDP) and the Republic of Croatia
• The EDP was activated in January 2014
• The Council of the EU, acting on a proposal from the European Commission,
adopted in January 2014 the Recommendations requiring from the Republic of
Croatia to resolve its excessive budget deficit by reducing it below 3% of GDP
by the end of 2016, and reduce the general government debt to less than 60% of
GDP two years later.
• Since June 2014, the EDP has been put on hold, as the European Commission
established that Croatia was taking appropriate measures for the purpose of
correcting its budgetary imbalances
• The Excessive Deficit Procedure continues to be in effect
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Macroeconomic Imbalances Procedure (MIP)
• The Macroeconomic Imbalances Procedure (MIP) is a surveillance
mechanism that aims to prevent and correct macroeconomic imbalances
within the EU
• The Republic of Croatia is placed in the 5th category of the Macroeconomic
Imbalances Procedure (excessive imbalances that require decisive political
action and specific monitoring) therefore, the EC monitors the
implementation of recommendations through a specific enhanced
monitoring mechanism
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Macroeconomic Imbalances Procedure (MIP)
MIP category
Member States in 2015*
1 Without imbalances
Austria, Czech Republic, Denmark,
Estonia, Lithuania, Luxembourg,
Latvia, Malta, Poland, Slovakia
2 Imbalances that require political action and monitoring
Belgium, Netherlands, Romania**,
Finland, Sweden, Great Britain
3 Imbalances requiring decisive political action and
monitoring
4 Imbalances requiring decisive political action and
specific monitoring
5 Excessive imbalances requiring decisive political action
and specific monitoring
6 Excessive imbalances that require decisive political
action and specific monitoring and activation of the
excessive imbalances procedure (EIP)
Hungary, Germany
Ireland, Spain, Slovenia
Bulgaria, France, Croatia, Italy,
Portugal
–
*Cyprus and Greece are included in the Macroeconomic Adjustment Programme
** Romania is included in a preventive programme of financial assistance
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Strategic documents – The Convergence
Programme and the National Reform Programme
•
•
•
NATIONAL REFORM
• CONVERGENCE PROGRAMME
PROGRAMME
• defines key characteristics of the
• defines the state of affairs and
macroeconomic framework and the
plans for the implementation of
fiscal policy of the Republic of Croatia
key structural policies of the
over a three-year period
government
• result of a process, during which all
• describes the measures taken by
EU Member States have a duty to
the government to achieve
report and align their economic
sustainable economic growth,
policies with the jointly defined
job creation and creation of
objectives and provisions of the EU.
better opportunities for Croatian
• such alignment and reporting is carried
citizens,
while
taking
into
out within the annual European
account the stability of public
Semester cycles
finances, sustainable level of
debt and high quality of public
services.
The Convergence Programme and the National Reform Programme describe in detail
principal measures whereby adopting recommendations of the Council of the EU for
resolving an excessive deficit situation
In the case of the Republic of Croatia, recommendations are, to a large degree (>75%)
aligned with the National Reform programme 2015 and the Convergence Programme for
the period 2015 - 2018.
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6 recommendations for Croatia in 10
areas
1.
Public finances
2.
Tax system
3.
Pension system
4.
Health system
5.
Banking sector
6.
Private debt
7.
Labour market
8.
Wage-setting
9.
Service sector - new with regard to the previous year
10.
Modernisation of public administration
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Convergence Programme measures
I. Binding recommendations of the Council of the EU for resolving excessive
deficit situations
Recommendations of the Council for correcting excessive deficits
%GDP
Deficit of the general government
Change in structural deficit
Implementation of structural measures
2014
2015
2016
4,6
3,5
2,7
-0,5
-0,9
-0,7
2,3
1,0
1,0
Fiscal projections - Recommendations of the Council of the EU have been completely
adopted and embedded in the fiscal projections of the Republic of Croatia
GDP
Deficit of the general government
2014
2015
2016
2017
2018
5,7
-5,0
-3,9
-2,7
-2,4
-0,5
-0,7
-0,8
1,5
1,2
1,0
Change in structural deficit
Implementation of structural
measures
2,5
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Recommendations of the EC and measures in NRP (Ministry of
Finance)
Recommendation 1
Measures in NRP
-
Publish and implement findings established by the
audit of expenditure.
-
-
Improve control of expenses at the central and local
levels, in particular by establishing a penalising
mechanism for those entities that do not comply with
budget constraints.
Adopt the Fiscal Responsibility Act and strengthen
the capacity and role of the State Audit Office..
Introduce real estate tax and improve discipline in
the VAT segment.
Measures, chosen on the basis of in-depth analysis of
expenses - have been embedded in NRP
In-depth analyses of expenses will be carried out
periodically for the most important expenses of the State
budget of the Republic of Croatia as a basis for further
rationalisation of the public sector
Improving the budget framework
Instructions for projecting expenses with the aim of
establishing an optimal cost level in view of their type and
application
Strengthening the internal financial control system and
widening the coverage of internal financial controls to
companies owned by the RC and local and regional selfgovernment units, and to other legal entities founded by
the RC or by local and regional self-government units
-
Improve the fiscal framework and strengthen fiscal rules
Strengthening the concept of the State Audit Office and
developing a penalising model for cases of noncompliance with the Recommendations given by the SAO
-
Audit of the calculation and collection of utility charges
Improving efficiency in collecting taxes (introducing a
system for managing risks deriving form tax liabilities and
tax payers)
Adoption of the public debt management strategy
Make the issue of state guarantees conditional upon the
restructuring plan of potential guarantee beneficiaries
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Strengthen public debt management, in particular by publishing the annual risk management strategy and providing adequate resources.
State treasury system - organisational structure
State treasury
Sector for Budget Preparation and
Financing of Local and Regional SelfGovernment Units
Sector for State Budget Execution
Sector for Public Debt Management
Sector for State Treasury System
Support
Service for Preparation and
Drawing Up of the State Budget
and for Preparation of Financial
Plans
Service for State Budget
Liquidity Management and
Financial Analyses
Service for Public Debt
Management
Service for Normative-Legal
Affairs
Service for Budget Analyses
and Evaluation of Capital
Projects
Service for Payment
Transactions
Service for State Guarantees,
Financial Liabilities and Claims
under Public Debt
Service for Development and
Support to the OperationalInformational System of the State
Treasury
Service for Financing of Local
and Regional Self-Government
Units
Service for State Accounting and
Non-Profit Organizations
Accounting
Sector for the National Fund tasks
Service for Financial
Management
Service for Financial Controls
Service for Accounting Tasks
and Monitoring of the System of
Pre-Accession Programmes
Financial Management and
Control
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State treasury system
Single account of the treasury – transparency of cash flows
• The model of managing public expenditure through the state treasury is based on
the principal of the existence of a single account through which all financial
budgetary transactions are performed
• The single account of the treasury with its sub-accounts has been opened with
the Croatian National Bank:
•
Sub-accounts of the single account of the treasury:
• Special purpose sub-account for paying salaries - 631
• Special purpose sub-account for paying current expenditure - 632
• An efficient and transparent daily management of state budget financial flows has
been provided
• A base for efficient financial planning
• Integration of the information system managing State budget finances with
regional treasury systems
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State treasury system
Comprehensive budget – transparent budget
• Failure to state all income and expenses of budget users (problem of thirdlevel budget users - faculties, health institutions, national parks etc.) in the
state budget is contrary to the principle of budget unity and
comprehensiveness
• Until 2015 in the Republic of Croatia an exemption from paying in own
revenues and assigned revenues and receipts of budget users in the budget
was tied to the exemption from planning of the mentioned revenues in the
state budget, i.e. in the budgets of local and regional self-government units
• possibility of exemption from paying in the mentioned revenues and receipts
of budget users in the competent budget must not exclude the obligation of
their planning
• If the state or local and regional self-government units through the Budget
Execution Act, i.e. decisions on budget execution, lay down an exemption
from the obligation to pay own revenues and assigned revenues and receipts
of budget users in the budget, they must provide that the realisation of their
own revenues and assigned revenues and receipts is monitored through
reporting.
• This information must be included in semi-annual and annual reports on
state budget execution, or the budget execution of local and regional self
government units
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State treasury system
Comprehensive budget – transparent budget
• The State budget of the Republic of Croatian for 2015 and projections for 2016 and
2017
• for the first time, own revenues and assigned revenues and receipts of health
institutions, national parks and nature parks and the State Institute for Nature
Protection, as well as public institutions included in the higher education system
have been stated
• The Act on the execution of the State budget of the Republic of Croatia for 2015
(Official Gazette, No148/14 and 103A/15) further lays down an exemption from
paying in own revenues and assigned revenues and receipts of the mentioned
institutions in the state budget
• Any own revenues and assigned revenues and receipts of third-level users make
part of the state budget for the next mid-term period, but they do not make part of
the cash flow of the state treasury system
•
these institutions continue to realise such revenues in their accounts and from their own
accounts they settle obligations/expenses which they finance from these sources
•
on the basis of monthly reports presented by these institutions, concerning the use of the
mentioned revenues, records are maintained in the state treasury system
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