Croatia plans to reduce budget gap in time for euro adoption in 2023

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The Croatian government said it planned to reduce its budget deficit next year to 2.6% of gross domestic product (GDP) from this year’s 3.8%, to bring it line with requirements for adopting the euro in 2023.

To join the single currency, Croatia must reduce its budget deficit to below 3.0% of GDP, which widened as public debt soared in 2020 due to the COVID-19 pandemic. “We see the general budget gap at 2.6% of GDP next year and then further falling to 1.9% and 1.5% in 2023 and 2024, respectively,” Finance Minister Zdravko Maric told the cabinet, which approved the measures.

The government expects public debt to decline to 86.6% of GDP this year, down from 88.7% last year, and then to fall by around three percentage points every year after that to reach 76.8% in 2024. Before the pandemic Croatia’s public debt stood at 72.8% of GDP.

Economic output, which fell 8.0% year-on-year in 2020, is forecast to grow 5.2% this year and 6.6% in 2022. A lot depends on the recovery of Croatia’s tourist industry which makes up around a fifth of the economy.