Implementation Effects of the European System of Accounts 2010 on the Government Finance Statistics in Croatia
As a member state of the European Union, Croatia is committed to delivering the excessive deficit procedure reports to the European Commission according to the European system of national and regional accounts (ESA 2010) methodology. The implementation of the new methodological framework in September 2014 had a significant effect on government finance data in Croatia. The ESA 2010 methodology is used to measure the government and total economic activity in a country in order to monitor macroeconomic stability and achieve
comparability of data with other member states. The aim of this paper is to establish the most significant changes in the scope of the general government and sector classifications of institutional units within the public sector, as well as to quantify the effects of the new methodology implementation on the fiscal position
of Croatia between 2009 and 2015. Fiscal indicator deviations are based on the comparative analysis of data pre-approved by Eurostat and provided to the European Commission according to ESA 95 and data delivered after the implementation of the ESA 2010 methodology. A comparison of the methodological frameworks and data indicates significant deviations resulting in increased relative and absolute values of the general government debt, while the implementation of the new methodological framework provides better insight into key fiscal risks and the public sector’s financial position. The reclassification of general
government sector units contributed substantially to the increase in public debt; affecting in particular Croatian Motorways, Motorway Rijeka-Zagreb, and the Croatian Bank for Reconstruction and Development. The general government budget deficit was also under the strong influence of the statistical treatment of
social contribution transfers from the second to the first pension pillar. Furthermore, frequent activation of government guarantees and the statistical treatment of certain public-private partnerships and concessions also added to the public debt. Apart from including the liabilities of state-owned enterprises, the general
government deficit was further affected by unfavourable economic conditions. Croatia managed to exit the excessive deficit procedure after three years following an improvement in her fiscal position due to an increase in government revenues, control of government expenditures and economic growth.