The proposal for the state budget for 2025, which the government submitted to the Parliament on Thursday, anticipates total revenues of the state budget of €33 billion, while expenditures are expected to reach €37 billion.
Total revenues are approximately €2.7 billion higher compared to the plan of the « rebalanced » budget for this year, while expenditures are higher by €3.4 billion, emphasized Deputy Prime Minister and Minister of Finance Marko Primorac at the government session.
Regarding the budget projections for the coming years, revenues are planned at €34.8 billion in 2026 and €35.1 billion in 2027. In terms of the structure of revenues for the next year’s budget, tax revenues are expected to reach around €18.5 billion, contributions €5.6 billion, around €600 million will come from property revenues, and €8.2 billion will consist of other revenues, Primorac noted at the government session.
Expenditures, according to the government’s projection, will amount to €38.2 billion in 2026 and €36.8 billion in 2027. In the latter year, there will be a slight reduction in expenditures, predominantly due to a decrease in the component of « EU and other aid, » said Primorac. In the planned budget expenditures for 2025, pensions and other benefits to citizens account for 30 percent, expenditures for employees reach 22 percent, 14 percent goes to aid for cities, counties, municipalities, and extrabudgetary users, 11 percent relates to subsidies, capital aid, and donations, 10 percent to support for financing public services, 8 percent are capital investments, and 5 percent consist of financial expenditures and contributions to the EU.
Investments in Demography, Defense Modernization…
By ministries, expenditures for the Ministry of Labor, Pension System, Family, and Social Policy are increasing the most compared to 2024, by €11.2 billion or six percent. Primorac notes that new ministries with new powers have been created, so expenditures for the Ministry of Science, Education, and Youth are planned to increase by €4.7 billion or 14 percent, the planned expenditures for the newly formed Ministry of Demography and Immigration amount to €687 million, the Ministry of Environmental Protection and Green Transition €991 million, while the judiciary and administration have added digital transformation, with planned expenditures for that ministry next year amounting to €873 million.
Thus, when it comes to demographic measures and support for families and children, total expenditures in 2025 will amount to €685 million, with the finance minister emphasizing that the allowance for newborns will increase from €309 to €618, and the maximum cash benefit for the other six months of parental leave will also increase.
He stated that investments in equipping and modernizing the military in 2025 should reach 2.1 percent of GDP, which amounts to €708 million, nearly €150 million more compared to 2024, and includes the procurement of the HIMARS rocket system, Bayraktar drones, Black Hawk helicopters, air defense systems, as well as Leopard battle tanks. There is also the reconstruction from the earthquake, and after €3.5 billion invested from 2020 to 2024, investments in the next three years should total €2.7 billion, of which €1.31 billion will be in 2025 alone.
Furthermore, the planned expenditures for the pension system in 2025 amount to €8.85 billion, while this year it amounts to €8.08 billion. Primorac notes that the average pension amount is continuously increasing, and next year a new formula for pension adjustment will also be applied. Among other things, Primorac presented a more detailed structure of allocations for employees in state and public services, with about 25 percent relating to employees in education, 23 percent in health care, 11 percent in police, 10 percent in science, 6 percent in defense, 5 percent in judiciary, and 20 percent in « others. »
GDP Growth of 3.2 Percent in 2025, Inflation of 2.7 Percent
Budget plans are projected with an economic growth of 3.2 percent next year, after a GDP growth of 3.6 percent is expected this year. According to Primorac, the main drivers of growth in 2025 should be personal consumption and gross investments in fixed capital. Real GDP growth is expected to be 2.8 percent in 2026, 2.6 percent in 2027, and 2.5 percent the following year, according to government projections. Primorac reminded of the « impressive progress » in recent years regarding the growth of the Croatian economy and the state of public finances, in terms of reducing the share of public debt in GDP and the deficit.
This year, a public debt share of 57.4 percent of GDP is expected, and a consolidated general government deficit of 2.1 percent. This share is expected to continue to decline next year, to 56 percent, while the deficit should amount to 2.3 percent. Thus, Croatia will be within the so-called Maastricht criteria for both criteria this year and next, noted Primorac.
Inflation is expected to slow to an average of 2.7 percent in 2025, and positive trends in the labor market should continue, with employment expected to increase by 2.9 percent.
Proposal of the Law on the Execution of the State Budget for 2025
For the first time, the National Medium-Term Fiscal Structural Plan for the period 2025 – 2028 has also been presented, which reflects macroeconomic developments and fiscal policy, and includes structural reforms and investments. It encompasses the remaining measures from the National Recovery and Resilience Plan (NPOO), totaling 201, as well as measures outside the NPOO, totaling 89, Primorac stated.
This is a strategic document based on which drafts of the budget plan will be prepared in the coming years, and accordingly, the proposal for the national budget, noted the finance minister.
Additionally, the proposal of the Law on the Execution of the State Budget for 2025 has been submitted to parliamentary procedure, under which borrowing in domestic and foreign markets can be conducted up to a total amount of €8.6 billion, while current principal repayments of state debt amount to €6.5 billion. Furthermore, Primorac noted that borrowing by extrabudgetary users of the state budget amounts to €406.8 million, and current principal repayments of debt amount to €231.6 million.
The annual value of new guarantees for 2025 amounts to €435 million, of which €260 million relates to extrabudgetary users. Finally, the percentage of the total limit for borrowing by all municipalities, cities, and counties in 2025 is set at five percent of the total revenues achieved from their operations this year.
