Government Adjusts 2025 Fiscal Outlook
The Croatian government announced on Friday, October 3, 2025, a revision to its 2025 budget plan, raising the projected budget deficit to 2.9% of Gross Domestic Product (GDP). This marks an increase from the originally planned target of 2.4%. The adjustment was presented by Deputy Prime Minister and Finance Minister Marko Primorac during a cabinet session.
Reasons Behind the Revision
Minister Primorac stated that the primary drivers for the revised forecast are increased social expenditures. These include significant adjustments to pensions, the introduction of an annual pension supplement, and enhanced maternity benefits. The government's objective is to strengthen the living standards for Croatian citizens and pensioners.
The revision allocates more than one billion euro (approximately $1.2 billion) towards these social programs, encompassing higher pensions, disbursements for salaries for employees in state and public services, and social and maternity support. Despite the increased spending, the revised plan also anticipates an increase in budget revenue by approximately 30 million euro, alongside cost-cutting measures amounting to 223 million euro.
Broader Economic Context and Previous Projections
The decision comes amidst a dynamic economic environment. Earlier in the year, the European Commission's Spring 2025 Economic Forecast, published on May 19, 2025, had already projected Croatia's general government deficit to reach 2.7% of GDP in 2025. Furthermore, the European Bank for Reconstruction and Development (EBRD) noted in September 2025 that government spending had increased significantly in the first half of 2025, following a moderate fiscal expansion in 2024.
Minister Primorac also acknowledged that inflation had surprised officials during the summer months, registering higher than initially forecast. He indicated that the average annual inflation rate could be about half a percentage point higher than the previously planned roughly three percent.
Fiscal Discipline and Future Outlook
Despite the upward revision, the new deficit target of 2.9% of GDP remains within the European Union's Stability and Growth Pact limits, which require member states to keep their budget deficits below 3% of GDP. The Croatian government continues to emphasize its commitment to fiscal responsibility, with Minister Primorac highlighting ongoing efforts to reduce the public debt-to-GDP ratio, which is projected to stand at 56.9% in 2025.
6 Comments
Bermudez
Where will this 'extra' money truly come from? Likely more taxes or cuts elsewhere eventually.
Africa
Investing in our citizens' well-being is the government's primary duty. Glad to see this priority.
Muchacho
Prioritizing social programs is a humane approach, but the context of increased government spending noted by the EBRD raises questions about the overall trajectory of fiscal expansion. Long-term sustainability needs constant monitoring.
ZmeeLove
Another budget revision, always upwards. This constant spending will lead to trouble.
Habibi
This will only fuel inflation further, eroding the value of everyone's money. Short-sighted.
Leonardo
While the focus on social expenditures like pensions and maternity benefits is commendable, the rising deficit trend could pose long-term fiscal challenges. We need to balance immediate needs with future stability.