Feb. 24 (Bloomberg) -- Croatian lawmakers approved the 2012 budget proposal, which includes 4 billion kuna ($700 million) in proposed cuts to narrow the deficit and to bolster the country’s credit ratings.
The cost-cutting should affect all branches of the public sector as budget spending is cut to 118.8 billion kuna, from last year’s 122.3 billion kuna. The measure is expected to narrow the budget gap to 3.8 percent of gross domestic product, from 5.5 percent in 2011.
“These are not popular reforms, but all the countries that are doing better today have already executed them,” Prime Minister Zoran Milanovic told lawmakers during the debate earlier this week. “The bottom line is that we need to lower expenditures without suffocating the economy, so that we can concentrate on growth.”
Croatia, which is set to become the European Union’s 28th member in 2013, is facing a review of its credit rating as it needs to service a growing external debt and revive its faltering economy. Milanovic last month said the economy will grow 0.8 percent this year, while central bank Governor Zeljko Rohatinski said in December the country may slide into recession again this year after a modest recovery in 2011.
--Editors: Douglas Lytle, James M. Gomez
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