Restructuring Public Spending in Croatia

RESTRUCTURING PUBLIC SPENDING IN CROATIA Linking Croatia and EU priorities. Croatia will have access to EU funds averaging Strategic EU funds allocation. 3.7% Enhancing the institu- tional capacity. MAXIMIZING THE EFFICIENT USE OF EU FUNDS of GDP per year during Establishing financial management system. 2014-2020. 1.1% 1.5% GDP saving GDP saving Eliminate sonme tax Introduce modern exemptions given to households and property taxation. Strengthen and modernize Croatia's tax administration. businesses. REVENUE-SIDE ADJUSTMENT Public administration 0.15% 1.0% Enhance strategic plan- ning, professionalization and performance-based management. GDP saving Reform the wage system and proceed with struc- tural reforms to enhance GDP saving Targeted downsizing program, introduce outsourcing & electronic services. public sector performance. RIGHTSIZING THE GOVERNMENT Croatia spends more on public administration than the new EU member states, Local & regional self-govern- ments 0.6% 0.25% but has a weak performance in terms of effectiveness, rule of law and administrative GDP saving Reduce central govern- ment transfers by increasing reliance on GDP saving Improve subnational fiscal operations moni- toring and territorial organization. Redefine spending res- ponsibilities to avoid duplication & overlap of functions. barriers to doing business. 12% own-source revenues. of GDP is used for the public administration Social Assistance Pension Healthcare System Croatia's Rapidly aging society and low labor partici- pation. Croatia's social protection system needs to be better targeted and based on needs rather than spending IMPROVING THE EFFICIENCY AND EQUITY OF SOCIAL SPENDING New EU categories. 5.4% members Croatia can achieve similar or better results with lower and more targeted social spending. 0.3% 1.1% 0.35% GDP saving Phasing out early of additional GDP cost GDP saving Eliminate payment delays by clearing the stock of arrears Extend means- testing to most social assistance and family programs. retirement and acce- lerate retirement age increase before 2030. and strengthening public fiscal manage- ment. Long-term 0.4% 0.3% 0.4% care GDP saving Reduce exempt copayment categories and adjust the complimentary health insurance premium. Increased coordination GDP saving in 2038 GDP saving and efficiency - through updates to the long-term care system, can help Rationalize the catego-. ries of privileged pensions and accelerate converge- Reduce losses due to error, fraud and corruption through strengthened oversight and inspection. reduce cost and boost nce of privileged pensions to PAYG. effectiveness in the country. Shift Long-term care services from the health to the 0.8% 0.25% social sector. GDP saving by 2020 Revisit the pension indexation and valorigation. GDP saving Identify redundant capacity to merge services and facilities. Assess eligibility for Decrease care needs-based social fragmentation and increase assistance programs through a single, unified set of criteria. coordination. Favor community- based over insti- tutional care. Explore the shift from public LTC services to 1.7% 0.25% transition cost of GDP GDP saving private providers. Gradually raising the second pillar contribution rate. Create lower-cost Explore the potential of cash benefits specialized ambu- latory centers. Enforce clinical and vouchers for guidelines by developing national care pathways. funding LTC. Reduce the preva- lence of behavioral risk factors by expanding public health services. 0.4% 0.5% GDP saving GDP saving Use means-testing for granting minimum pensions. Reduce the referal Consolidate health rates in the primary services network by geographic areas. health care. Expand eHealth systems. There is little evidence that Optimize subsidies helped improve the performance of the recipients, especially in railroads, ports & agriculture. 1.0% Railways and agricul- ture can make use GDP saving of large EU funds to improve efficiency, increase competi- tiveness and overall Rationalization, reduc- tion or abolishment 2.0% of inefficient subsidies. RATIONALIZING SUBSIDIES of GDP is used for subsidies performance. To learn more, please visit: www.worldbank.org/en/country/croatia Croatia Public Finance Review: THE WORLD BANK IBRD . IDA | WORLD BANK GROUP Restructuring Spending for Stability and Growth