ZAGREB, March 16 (Reuters) - Croatia's budget deficit may be wider than planned this year due to lower revenues and the government wants unions to agree a wage freeze to ease pressure, a top finance ministry source was quoted as saying on Monday.
The government plans to revise the budget in late March or early April after cutting its forecast for the economy this year to a two-percent contraction from a forecast for growth of 2 percent.
Originally, the government set the gap at 0.9 percent of gross domestic product, but it may turn out to be even wider as the finance ministry source said revenue projections had now been cut to 116.5 billion kuna from 124.6 billion.
"In case we keep expenditures as previously planned, at 126.9 billion kuna, we will have a gap of some 10.4 billion kuna," state news agency Hina quoted the finance ministry source as saying.
The government said last week that ministries would aim to cut spending by almost 4 billion kuna as part of an anti-recession package, while a wage freeze might save a further 1.8 billion kuna.
However, the public sector unions -- whose rejection of a wage freeze proposal in December forced the government to abandon plans for a balanced budget -- once again ruled out the idea, saying spending cuts should be found elsewhere.
The talks should resume on Tuesday.
The ministry source said there were no plans to increase tax revenues, even if it meant widening the budget deficit.
"Even if there is an agreement on freezing wages, the remaining gap would still probably mean an increase of the budget gap this year," Hina quoted the source as saying.
The government plans to issue a Eurobond in the second quarter to finance the deficit.
The source also said an agreement with the unions would probably help avoid the country having to turn to the International Monetary Fund, which would require strict expenditure cuts.
Unlike Croatia, neighbouring Serbia has signed a stand-by deal with the IMF, and said on Monday it had asked the world lender for 3 billion euros in a two-year loan programme to back its strained public finances. [ID:nLG500031]. (Reporting by Igor Ilic; editing by Stephen Nisbet)