By Zoran Radosavljevic
ZAGREB, Feb 24 (Reuters) - The deepening global crisis has forced the Croatian government to mull new measures to cut expenditures and find funds to finance budget and external deficits.
The country's Value Added Tax revenue collection fell some 10 percent below plan in the first six weeks of the year, according to Finance Minister Ivan Suker, who indicated the government was now inclined to rebalance the budget.
"We have to see where to deduct, from investments, welfare, subsidies," Suker said on Monday.
Prime Minister Ivo Sanader's government still hopes it can weather the crisis without turning to the International Monetary Fund for help, like neighbours Hungary and Serbia have did.
In December, the government caved in to union pressure and approved a blanket six percent wage increase to the public sector, abandoning its plan to run a balanced budget.
Instead, it set the budget gap at 0.9 percent of GDP, on a growth projection of two percent, which analysts said was well out of reach, as they expected the local economy to contract this year for the first time in a decade.
Union leader Vilim Ribic said on Monday the conditions were "there now to justify a wage freeze". This would facilitate the government's efforts to cut spending, which it has rejected as unnecessary until this week.
NEW MEASURES EXPECTED
Sanader on Tuesday was meeting heads of state-owned companies -- many of them heavily subsidised and unprofitable -- and was expected to order them to improve efficiency and cut expenditure. Sanader on Wednesday will chair a new meeting of the national economic council, his top economic advisers, and the government is expected to approve new measures on Thursday.
"No one has explicitly said yet the budget will be rebalanced, but there are conditions and there is space to do it now," a government source told Reuters. "A package of measures will certainly be passed on Thursday," he said.
However, analysts said it might be too little and too late.
"The government has definitely reacted too late to the crisis. Meanwhile, the outlook for economic growth has worsened further. I expect the GDP could contract some three percent this year," said Hrvoje Stojic of Hypo Group Alpe Adria. While the government has yet to revise its forecast of 2 percent growth, most analysts, including the World Bank, believe the economy will contract between one and two percent this year.
This year Croatia must service debt amounting to 21 percent of its GDP, or around 8.5 billion euros, three-quarters of that in the private sector. (Reporting by Zoran Radosavljevic, Editing by Jason Neely)