The Croatian government on Thursday decided to take new measures to reduce its budget deficit in order to comply with European Commission (EC) requirements, it was announced.
The new measures aimed at to reduce the shortfall by some 1.3 billion kuna (235 million U.S. dollars) through increases in fuel taxes and telecom operation, as well as cutting subsidies and investments.
Croatian Finance Minister Slavko Linic believed the new measures would negatively impact the country's economic growth, which has suffered five years of continuous recession.
Linic said, "We have therefore cut our growth forecast from 0.2 percent to zero, which means further stagnation."
Croatia, the latest member of the European Union (EU), was asked to present its measures to cut the budget deficit by the end of April in line with the EU's excessive deficit procedure.
EC wanted Croatia to reduce its budget gap by 2.3 percent of GDP this year and bring the gap below 3 percent of GDP by the end of 2016.
In March, the country revised its budget to cut the deficit by 1.9 percent of its general budget gap to 4.5 percent of GDP from an earlier 5.7 percent. The government expected the new measures would help ensure an additional 0.4 percent cut to fulfill the required targets.
The Croatian government is trying to raise 700 million kunas (132 million U.S. dollars) of revenues by raising excise on fuel by about 0.2 kuna per litre, and higher radio frequency fees for telecom operators.
The government is expected to save some 640 million kuna (120 million U.S. dollars) through reducing subsidies for farmers and shipyard restructuring, as well as catting investment in planned road building and business incentives.