Abstract
This Selected Issues paper and Statistical Appendix analyzes developments in Croatia’s banking sector since independence in 1991, focusing on the effects of independence, war, transition, and the bank rehabilitation process. Changes in market structure, concentration, and ownership, as well as financial performance are highlighted. The paper reviews the current legal environment governing banking operations and improvements needed to strengthen the legislative framework. Some forward-looking conclusions are presented. The paper also examines selected aspects of Croatia’s export performance.
III. Government Social Expenditure in Croatia: Recent Trends and Comparison with Other Countries33, 34
A. Recent Trends
84. Total social expenditure by the Croatian consolidated central government has increased quite substantially in recent years (Table 14). This is true whether expenditure is measured as a percentage of GDP or as a percentage of total government expenditure. Between 1994 and 1997, total social expenditure rose by about 6 percentage points of GDP and its share in total expenditure by 6½ percentage points. Social expenditure in 1997 (on a cash basis, and therefore excluding the expenditure arrears, accumulated by the pension and health funds in that year) represented 57½ percent of Croatia’s government expenditure and 26½ percent of its GDP.
Croatia: Social Expenditure, 1994-98 1/
On a cash basis.
Assumes the clearing of the expenditure arrears accumulated by the health and pension funds in 1997, tentatively estimated at Hrk 900 million.
As a percentage of total expenditure (excluding net lending) of the consolidated central government.
Includes maternity benefits.
On a consolidated basis.
Croatia: Social Expenditure, 1994-98 1/
| 1994 Actual | 1995 Actual | 1996 Actual | 1997 Actual | 1998 Projected 2/ | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | ||||
| Consolidated central government | 20.5 | 51.1 | 23.1 | 51.6 | 24.5 | 54.0 | 26.4 | 57.6 | 26.8 | 58.9 | |||
| Education | 2.9 | 7.1 | 2.9 | 6.5 | 3.0 | 6.5 | 3.0 | 6.5 | 3.1 | 6.9 | |||
| Health | 5.9 | 14.8 | 7.0 | 15.6 | 7.4 | 16.3 | 6.9 | 15.0 | 7.8 | 17.1 | |||
| Social security and welfare 4/ | 11.7 | 29.2 | 13.2 | 29.5 | 14.1 | 31.2 | 16.5 | 36.0 | 15.9 | 34.9 | |||
| Of which: Pensions | 7.6 | 19.0 | 9.0 | 20.1 | 9.8 | 21.5 | 11.6 | 25.8 | 11.0 | 24.2 | |||
| Of which: | |||||||||||||
| Central budgetary government 5/ | 5.7 | 14.1 | 5.6 | 12.5 | 5.5 | 12.2 | 5.9 | 12.9 | 6.1 | 13.4 | |||
| Education | 2.9 | 7.1 | 2.9 | 6.5 | 3.0 | 6.5 | 3.0 | 6.5 | 3.1 | 6.9 | |||
| Health | 0.1 | 0.2 | 0.1 | 0.2 | 0.1 | 0.3 | 0.2 | 0.3 | 0.2 | 0.4 | |||
| Social security and welfare 4/ | 2.7 | 6.8 | 2.6 | 5.8 | 2.5 | 5.4 | 2.8 | 6.0 | 2.8 | 6.1 | |||
| Of which: Pensions | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||
| Extrabudgetary funds 5/ | 14.9 | 37.0 | 17.5 | 39.1 | 19.0 | 41.8 | 20.5 | 44.7 | 20.7 | 45.5 | |||
| Health | 5.9 | 14.6 | 6.9 | 15.4 | 7.3 | 16.0 | 6.7 | 14.7 | 7.6 | 16.7 | |||
| Social security and welfare 4/ | 9.0 | 22.4 | 10.6 | 23.7 | 11.7 | 25.8 | 13.7 | 30.0 | 13.1 | 28.8 | |||
| Of which: Pensions | 7.6 | 19.0 | 9.0 | 20.1 | 9.8 | 21.5 | 11.6 | 25.2 | 11.0 | 24.2 | |||
| Memorandum items: | |||||||||||||
| Transfer from the central budgetary government to the Pension Fund | 0.0 | 0.0 | 0.3 | 0.6 | 1.0 | 2.3 | 2.2 | 5.0 | 2.2 | 4.7 | |||
| Total expenditure of the consolidated central government (excl. net lending) | 40.2 | 100.0 | 44.8 | 100.0 | 45.4 | 100.0 | 45.8 | 100.0 | 45.2 | 100.0 | |||
On a cash basis.
Assumes the clearing of the expenditure arrears accumulated by the health and pension funds in 1997, tentatively estimated at Hrk 900 million.
As a percentage of total expenditure (excluding net lending) of the consolidated central government.
Includes maternity benefits.
On a consolidated basis.
Croatia: Social Expenditure, 1994-98 1/
| 1994 Actual | 1995 Actual | 1996 Actual | 1997 Actual | 1998 Projected 2/ | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | Percent of GDP | Percent of total expenditure 3/ | ||||
| Consolidated central government | 20.5 | 51.1 | 23.1 | 51.6 | 24.5 | 54.0 | 26.4 | 57.6 | 26.8 | 58.9 | |||
| Education | 2.9 | 7.1 | 2.9 | 6.5 | 3.0 | 6.5 | 3.0 | 6.5 | 3.1 | 6.9 | |||
| Health | 5.9 | 14.8 | 7.0 | 15.6 | 7.4 | 16.3 | 6.9 | 15.0 | 7.8 | 17.1 | |||
| Social security and welfare 4/ | 11.7 | 29.2 | 13.2 | 29.5 | 14.1 | 31.2 | 16.5 | 36.0 | 15.9 | 34.9 | |||
| Of which: Pensions | 7.6 | 19.0 | 9.0 | 20.1 | 9.8 | 21.5 | 11.6 | 25.8 | 11.0 | 24.2 | |||
| Of which: | |||||||||||||
| Central budgetary government 5/ | 5.7 | 14.1 | 5.6 | 12.5 | 5.5 | 12.2 | 5.9 | 12.9 | 6.1 | 13.4 | |||
| Education | 2.9 | 7.1 | 2.9 | 6.5 | 3.0 | 6.5 | 3.0 | 6.5 | 3.1 | 6.9 | |||
| Health | 0.1 | 0.2 | 0.1 | 0.2 | 0.1 | 0.3 | 0.2 | 0.3 | 0.2 | 0.4 | |||
| Social security and welfare 4/ | 2.7 | 6.8 | 2.6 | 5.8 | 2.5 | 5.4 | 2.8 | 6.0 | 2.8 | 6.1 | |||
| Of which: Pensions | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||
| Extrabudgetary funds 5/ | 14.9 | 37.0 | 17.5 | 39.1 | 19.0 | 41.8 | 20.5 | 44.7 | 20.7 | 45.5 | |||
| Health | 5.9 | 14.6 | 6.9 | 15.4 | 7.3 | 16.0 | 6.7 | 14.7 | 7.6 | 16.7 | |||
| Social security and welfare 4/ | 9.0 | 22.4 | 10.6 | 23.7 | 11.7 | 25.8 | 13.7 | 30.0 | 13.1 | 28.8 | |||
| Of which: Pensions | 7.6 | 19.0 | 9.0 | 20.1 | 9.8 | 21.5 | 11.6 | 25.2 | 11.0 | 24.2 | |||
| Memorandum items: | |||||||||||||
| Transfer from the central budgetary government to the Pension Fund | 0.0 | 0.0 | 0.3 | 0.6 | 1.0 | 2.3 | 2.2 | 5.0 | 2.2 | 4.7 | |||
| Total expenditure of the consolidated central government (excl. net lending) | 40.2 | 100.0 | 44.8 | 100.0 | 45.4 | 100.0 | 45.8 | 100.0 | 45.2 | 100.0 | |||
On a cash basis.
Assumes the clearing of the expenditure arrears accumulated by the health and pension funds in 1997, tentatively estimated at Hrk 900 million.
As a percentage of total expenditure (excluding net lending) of the consolidated central government.
Includes maternity benefits.
On a consolidated basis.
85. The bulk of the increase in social expenditure is explained by the expansion of pension benefits and, to a lesser extent, of health expenditure. The increase in pension benefits largely reflects population aging, the increase in the minimum guaranteed pension in 1996, and the granting of new “beneficiary pensions” to war participants and invalids, as well as to families of war victims. Also, the reintegration into Croatia of Eastern Slavonia and other regions substantially increased pensions as well as health expenditure in 1997, by adding to the number of beneficiaries without leading to a concomitant increase in contributions. By contrast, education expenditure remained practically stable during this period, with its share ir total expenditure actually declining moderately.
86. While the biggest annual increase in the share of social expenditure in GDP took place in 1995, most of the increase in the share in total government expenditure took place in 1996 and 1997. This is because total expenditure also rose sharply (by 4½ percentage points of GDP) in 1995, partly reflecting the war-related jump in defense expenditure. In 1996 and 1997, by contrast, total expenditure by the consolidated central government remained practically stable as a percentage of GDP and the increase in the share of social expenditure in GDP was achieved through a significant redistribution of government expenditure toward social outlays (and, largely, away from defense expenditure).
B. Projections for Social Expenditure in 1998
87. Based on the budget and plans for the extrabudgetary funds for 1998, social expenditure in Croatia is expected to increase from its 1997 level. Total social outlays could rise by almost half a percentage point of GDP and their share in total expenditure by 1¼ percentage point. The main factor behind this new expansion of social expenditure is spending on health, which could increase by almost 1 percentage point of GDP on current plans. This contrasts with the trend observed between 1994 and 1997, when pension expenditure accounted for the bulk of the increase in social expenditure. The projected increase in health expenditure in 1998 largely reflects the clearing of the expenditure arrears incurred by the Health Fund in 1997 and the estimated impact of the introduction of the VAT on the cost of the Health Fund’s purchases.35 Some of these arrears have already begun to be cleared, with the government approving in March 1998 a new transfer of HRK 200 million to the Health Fund earmarked for this purpose.
88. Pension expenditure is projected to decline by about ½ a percentage point of GDP in 1998.36 This does not take into account, however, the new pension payment obligations that may stem from the recent Constitutional Court ruling invalidating past government decisions suspending the indexation of pensions to wages since 1993. Although it is still unclear how this issue will be resolved, compliance with this ruling may result in higher pension payments already in 1998.37
89. Other categories of social expenditure (education and social security outlays other than pensions) are projected to remain practically constant as a percentage of GDP in 1998, and to increase only moderately as a percentage of total expenditure.
C. Comparison with Other Countries
90. Croatia’s share of social expenditure in total expenditure by the consolidated central government (57.6 percent in 1997) is much higher than the average share seen in other transition countries for which data were available (46.1 percent), although a few of those countries had similar shares (Table 15). Croatia’s share is even significantly above the average of the selected industrial countries shown in Table 15, and is only exceeded by two of them (the Netherlands and Switzerland). With Croatia’s ratio of government expenditure to GDP being relatively high, the contrast between its social-expenditure-to-GDP ratio (26.4 percent in 1997) and those seen in the two groups of comparator countries (15.5 percent and 19.3 percent for the transition and industrial countries, respectively) is even more marked.
Government Social Expenditure in Selected Industrial and Transition Countries
(In percent of total expenditure) 1/
Expenditure by the consolidated central government, excluding net lending.
Simple average.
Government Social Expenditure in Selected Industrial and Transition Countries
(In percent of total expenditure) 1/
| Year | Education | Health | Social security and welfare | Total social expenditure | ||
|---|---|---|---|---|---|---|
| Industrial countries | ||||||
| United States | 1995 | 1.8 | 19.2 | 29.2 | 50.2 | |
| Canada | 1994 | 2.9 | 4.9 | 39.8 | 47.6 | |
| Japan | 1993 | 6.0 | 1.6 | 36.8 | 44.4 | |
| Australia | 1995 | 7.6 | 13.4 | 33.6 | 54.6 | |
| Switzerland | 1993 | 2.6 | 20.5 | 48.2 | 71.2 | |
| United Kingdom | 1995 | 4.9 | 14.0 | 31.1 | 50.0 | |
| Netherlands | 1995 | 10.6 | 14.6 | 37.0 | 62.3 | |
| Denmark | 1995 | 9.4 | 0.8 | 43.2 | 53.4 | |
| Sweden | 1995 | 5.3 | 0.3 | 51.9 | 57.4 | |
| Norway | 1994 | 6.7 | 3.7 | 36.7 | 47.1 | |
| Spain | 1993 | 4.2 | 6.2 | 39.6 | 49.9 | |
| Ireland | 1993 | 13.0 | 14.2 | 27.6 | 54.8 | |
| Greece | 1993 | 11.8 | 22.6 | 22.5 | 56.9 | |
| Average of countries above 2/ | 6.7 | 10.5 | 36.7 | 53.8 | ||
| Central and Eastern Europe | ||||||
| Albania | 1995 | 2.3 | 5.6 | 21.7 | 29.6 | |
| Belarus | 1992 | 17.6 | 2.5 | 36.5 | 56.6 | |
| Bulgaria | 1995 | 4.0 | 3.4 | 25.3 | 32.6 | |
| Czech Republic | 1995 | 11.6 | 16.7 | 28.9 | 57.2 | |
| Estonia | 1994 | 8.8 | 16.9 | 30.0 | 55.7 | |
| Latvia | 1995 | 14.5 | 6.1 | 36.7 | 57.3 | |
| Lithuania | 1995 | 6.5 | 6.6 | 34.8 | 47.9 | |
| Romania | 1994 | 9.7 | 8.1 | 28.8 | 46.6 | |
| Russia | 1995 | 2.2 | 1.7 | 27.7 | 31.6 | |
| Average of countries above 2/ | 8.6 | 7.5 | 30.0 | 46.1 | ||
Expenditure by the consolidated central government, excluding net lending.
Simple average.
Government Social Expenditure in Selected Industrial and Transition Countries
(In percent of total expenditure) 1/
| Year | Education | Health | Social security and welfare | Total social expenditure | ||
|---|---|---|---|---|---|---|
| Industrial countries | ||||||
| United States | 1995 | 1.8 | 19.2 | 29.2 | 50.2 | |
| Canada | 1994 | 2.9 | 4.9 | 39.8 | 47.6 | |
| Japan | 1993 | 6.0 | 1.6 | 36.8 | 44.4 | |
| Australia | 1995 | 7.6 | 13.4 | 33.6 | 54.6 | |
| Switzerland | 1993 | 2.6 | 20.5 | 48.2 | 71.2 | |
| United Kingdom | 1995 | 4.9 | 14.0 | 31.1 | 50.0 | |
| Netherlands | 1995 | 10.6 | 14.6 | 37.0 | 62.3 | |
| Denmark | 1995 | 9.4 | 0.8 | 43.2 | 53.4 | |
| Sweden | 1995 | 5.3 | 0.3 | 51.9 | 57.4 | |
| Norway | 1994 | 6.7 | 3.7 | 36.7 | 47.1 | |
| Spain | 1993 | 4.2 | 6.2 | 39.6 | 49.9 | |
| Ireland | 1993 | 13.0 | 14.2 | 27.6 | 54.8 | |
| Greece | 1993 | 11.8 | 22.6 | 22.5 | 56.9 | |
| Average of countries above 2/ | 6.7 | 10.5 | 36.7 | 53.8 | ||
| Central and Eastern Europe | ||||||
| Albania | 1995 | 2.3 | 5.6 | 21.7 | 29.6 | |
| Belarus | 1992 | 17.6 | 2.5 | 36.5 | 56.6 | |
| Bulgaria | 1995 | 4.0 | 3.4 | 25.3 | 32.6 | |
| Czech Republic | 1995 | 11.6 | 16.7 | 28.9 | 57.2 | |
| Estonia | 1994 | 8.8 | 16.9 | 30.0 | 55.7 | |
| Latvia | 1995 | 14.5 | 6.1 | 36.7 | 57.3 | |
| Lithuania | 1995 | 6.5 | 6.6 | 34.8 | 47.9 | |
| Romania | 1994 | 9.7 | 8.1 | 28.8 | 46.6 | |
| Russia | 1995 | 2.2 | 1.7 | 27.7 | 31.6 | |
| Average of countries above 2/ | 8.6 | 7.5 | 30.0 | 46.1 | ||
Expenditure by the consolidated central government, excluding net lending.
Simple average.
91. Although, as noted, the share of Croatian education expenditure in GDP has not risen much in recent years, this share is somewhat above the average seen in transition and industrial countries. Cross-country comparisons of government expenditure on “health” and “social security and welfare” are less reliable since the classification of certain of these expenditures between the two categories varies across countries. This probably explains in part why the relative weights of “health” and “social security and welfare expenditure” in Tables 15 and 16 diverge sharply, even for countries within the same group and with similar levels of total social expenditure.38 With this caveat in mind, the attached tables suggest that Croatia’s higher share of social expenditure reflects higher expenditure on the “health” and “social security and welfare” components in roughly equal proportions.
Government Social Expenditure in Selected Industrial and Transition Countries
(In percent of GDP)
Simple average.
Government Social Expenditure in Selected Industrial and Transition Countries
(In percent of GDP)
| Year | Education | Health | Social security and welfare | Total social expenditure | ||
|---|---|---|---|---|---|---|
| Industrial countries | ||||||
| United States | 1995 | 0.4 | 4.2 | 6.4 | 11.0 | |
| Canada | 1994 | 0.7 | 1.2 | 9.7 | 11.6 | |
| Japan | 1993 | 1.5 | 0.4 | 8.9 | 10.7 | |
| Australia | 1995 | 2.1 | 3.7 | 9.3 | 15.1 | |
| Switzerland | 1993 | 0.7 | 5.5 | 13.1 | 19.3 | |
| United Kingdom | 1995 | 2.1 | 5.8 | 13.0 | 20.9 | |
| Netherlands | 1995 | 5.4 | 7.4 | 18.8 | 31.7 | |
| Denmark | 1995 | 4.1 | 0.4 | 18.7 | 23.2 | |
| Sweden | 1995 | 2.4 | 0.1 | 23.3 | 25.8 | |
| Norway | 1994 | 2.8 | 1.5 | 15.1 | 19.4 | |
| Spain | 1993 | 1.7 | 2.4 | 15.6 | 19.7 | |
| Ireland | 1993 | 5.5 | 6.0 | 11.7 | 23.2 | |
| Greece | 1993 | 4.0 | 7.7 | 7.7 | 19.5 | |
| Average of countries above 1/ | 2.6 | 3.6 | 13.2 | 19.3 | ||
| Central and Eastern Europe | ||||||
| Albania | 1995 | 1.3 | 3.1 | 12.1 | 16.5 | |
| Bulgaria | 1995 | 1.6 | 1.4 | 10.5 | 13.6 | |
| Czech Republic | 1995 | 4.6 | 6.7 | 11.5 | 22.8 | |
| Estonia | 1994 | 2.8 | 5.4 | 9.6 | 17.8 | |
| Latvia | 1995 | 4.7 | 1.9 | 11.8 | 18.4 | |
| Lithuania | 1995 | 1.7 | 1.7 | 8.9 | 12.2 | |
| Romania | 1994 | 3.1 | 2.6 | 9.2 | 14.9 | |
| Russia | 1995 | 0.5 | 0.4 | 6.6 | 7.6 | |
| Average of countries above 1/ | 2.5 | 2.9 | 10.0 | 15.5 | ||
Simple average.
Government Social Expenditure in Selected Industrial and Transition Countries
(In percent of GDP)
| Year | Education | Health | Social security and welfare | Total social expenditure | ||
|---|---|---|---|---|---|---|
| Industrial countries | ||||||
| United States | 1995 | 0.4 | 4.2 | 6.4 | 11.0 | |
| Canada | 1994 | 0.7 | 1.2 | 9.7 | 11.6 | |
| Japan | 1993 | 1.5 | 0.4 | 8.9 | 10.7 | |
| Australia | 1995 | 2.1 | 3.7 | 9.3 | 15.1 | |
| Switzerland | 1993 | 0.7 | 5.5 | 13.1 | 19.3 | |
| United Kingdom | 1995 | 2.1 | 5.8 | 13.0 | 20.9 | |
| Netherlands | 1995 | 5.4 | 7.4 | 18.8 | 31.7 | |
| Denmark | 1995 | 4.1 | 0.4 | 18.7 | 23.2 | |
| Sweden | 1995 | 2.4 | 0.1 | 23.3 | 25.8 | |
| Norway | 1994 | 2.8 | 1.5 | 15.1 | 19.4 | |
| Spain | 1993 | 1.7 | 2.4 | 15.6 | 19.7 | |
| Ireland | 1993 | 5.5 | 6.0 | 11.7 | 23.2 | |
| Greece | 1993 | 4.0 | 7.7 | 7.7 | 19.5 | |
| Average of countries above 1/ | 2.6 | 3.6 | 13.2 | 19.3 | ||
| Central and Eastern Europe | ||||||
| Albania | 1995 | 1.3 | 3.1 | 12.1 | 16.5 | |
| Bulgaria | 1995 | 1.6 | 1.4 | 10.5 | 13.6 | |
| Czech Republic | 1995 | 4.6 | 6.7 | 11.5 | 22.8 | |
| Estonia | 1994 | 2.8 | 5.4 | 9.6 | 17.8 | |
| Latvia | 1995 | 4.7 | 1.9 | 11.8 | 18.4 | |
| Lithuania | 1995 | 1.7 | 1.7 | 8.9 | 12.2 | |
| Romania | 1994 | 3.1 | 2.6 | 9.2 | 14.9 | |
| Russia | 1995 | 0.5 | 0.4 | 6.6 | 7.6 | |
| Average of countries above 1/ | 2.5 | 2.9 | 10.0 | 15.5 | ||
Simple average.
92. Regarding Croatia’s relatively high expenditure on “social security and welfare”, a combined analysis of the information in Tables 16 and 17 suggests that it is basically explained by its higher expenditure on pensions. The rest of the difference within this category is largely accounted for by Croatia’s exceptionally high war-related social expenditures, in particular assistance (other than through pension benefits) to refugees, displaced persons, war participants (including demobilized soldiers), and war victims.
Comparison of Indicators of Public Pension Schemes in Selected Country-Groups 1/
In percentages. Based on data referring to years ranging from 1985 to 1992, depending on the country. Data for Croatia refer to 1997.
Data refer to l991.
As a percentage of the gross wage rate.
Simple average.
Data for Croatia refer to 1997, except data on contribution rates which refer to 1998.
Comparison of Indicators of Public Pension Schemes in Selected Country-Groups 1/
| Public pension | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Public pension | spending/govemment | Normal retirement age 2/ | Payroll tax for pensions 2/ 3/ | ||||||
| spending/GDP 1/ | spending 1/ | Women | Men | Employers | Employees | Total | |||
| Women | Men | Employers | Employees | Total | |||||
| OECD countries 4/ | 9.2 | 24.7 | 62.9 | 64.4 | 7.4 | 11 | 18.4 | ||
| Eastern Europe and FSU 4/ | 8 | 19.1 | 55.3 | 60.3 | … | … | 25.5 | ||
| Latin America and Caribbean 4/ | 2 | 8.5 | 58.7 | 60.8 | 4.5 | 8.4 | 12.9 | ||
| Middle East and North Africa 4/ | 2.8 | 7.9 | 57.8 | 60.4 | 4.8 | 8.3 | 13.1 | ||
| Sub-Saharan Africa 4/ | 0.5 | 1.8 | 56 | 56.2 | 3.6 | 5.6 | 9.2 | ||
| Asia 4/ | 1.9 | 9.6 | 55.6 | 56.5 | 5.1 | 7.9 | 13 | ||
| Average of regions above 4/ | 4.1 | 11.9 | 57.7 | 59.8 | 5.1 | 8.2 | 15.4 | ||
| Memorandum item: | |||||||||
| Croatia 5/ | 11.6 | 25.8 | 55 | 60 | 10.75 | 10.75 | 21.5 | ||
In percentages. Based on data referring to years ranging from 1985 to 1992, depending on the country. Data for Croatia refer to 1997.
Data refer to l991.
As a percentage of the gross wage rate.
Simple average.
Data for Croatia refer to 1997, except data on contribution rates which refer to 1998.
Comparison of Indicators of Public Pension Schemes in Selected Country-Groups 1/
| Public pension | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Public pension | spending/govemment | Normal retirement age 2/ | Payroll tax for pensions 2/ 3/ | ||||||
| spending/GDP 1/ | spending 1/ | Women | Men | Employers | Employees | Total | |||
| Women | Men | Employers | Employees | Total | |||||
| OECD countries 4/ | 9.2 | 24.7 | 62.9 | 64.4 | 7.4 | 11 | 18.4 | ||
| Eastern Europe and FSU 4/ | 8 | 19.1 | 55.3 | 60.3 | … | … | 25.5 | ||
| Latin America and Caribbean 4/ | 2 | 8.5 | 58.7 | 60.8 | 4.5 | 8.4 | 12.9 | ||
| Middle East and North Africa 4/ | 2.8 | 7.9 | 57.8 | 60.4 | 4.8 | 8.3 | 13.1 | ||
| Sub-Saharan Africa 4/ | 0.5 | 1.8 | 56 | 56.2 | 3.6 | 5.6 | 9.2 | ||
| Asia 4/ | 1.9 | 9.6 | 55.6 | 56.5 | 5.1 | 7.9 | 13 | ||
| Average of regions above 4/ | 4.1 | 11.9 | 57.7 | 59.8 | 5.1 | 8.2 | 15.4 | ||
| Memorandum item: | |||||||||
| Croatia 5/ | 11.6 | 25.8 | 55 | 60 | 10.75 | 10.75 | 21.5 | ||
In percentages. Based on data referring to years ranging from 1985 to 1992, depending on the country. Data for Croatia refer to 1997.
Data refer to l991.
As a percentage of the gross wage rate.
Simple average.
Data for Croatia refer to 1997, except data on contribution rates which refer to 1998.
93. As a percentage of total expenditure, Croatia spends on pensions approximately the same as the average OECD country. However, this partly reflects Croatia’s high government expenditure-to-GDP ratio. As a share of GDP, Croatia’s expenditure on pensions is among the highest in the world. In particular, Croatia’s pension benefits-to-GDP ratio is exceeded in only a handful of industrial and transition countries. This ratio is also several times higher than those seen in developing countries, although, with the population in these countries being much younger, the comparison with them is much less relevant. Table 17 also shows that normal retirement ages in Croatia are low in comparison with OECD countries, but not in comparison with country groups with lower life expectancies, including the transition countries group.39 Finally, Table 17 confirms the view that Croatia’s payroll taxes for pensions are relatively high, though similar to those seen on average in other transition countries.
Prepared by Heliodoro Temprano-Arroyo.
Government social expenditure is defined in this chapter as the sum of expenditures on education, health, and social security and welfare, undertaken by the consolidated central government. These are three of the main expenditure groupings distinguished in the Government Financial Statistics’ functional classification of expenditure. The social security and welfare category is normally dominated by pension benefits. The sources of the government expenditure data used in this chapter are the Ministry of Finance for Croatia and the IMF’s Government Finance Statistics Yearbook for all other countries.
Under the VAT introduced in January 1998, the standard 22 percent rate applies to the Health Fund’s purchases of goods and services. Under the sales tax that the VAT replaced, by contrast, most of these purchases were either exempt or subject to reduced rates. The application of the VAT is estimated to increase the annual cost of the Health Fund’s purchases by 0.3-0.5 percent of GDP.
The 1998 budget reduced by about HRK 300 million the government transfer to the Pension Fund relative to its 1997 actual level, implying a 5 percent increase compared to the transfers initially foreseen in the 1997 budget. The budget, however, did not take into account the need to clear the arrears accumulated by the Pension Fund last year on its payment of contributions to the Health Fund, estimated at about HRK 300 million. Partly reflecting this, the staff projection assumes larger-than-budgeted transfers from the government to the Pension Fund. Pension payments are also projected to be higher than assumed in the Pension Fund’s plan.
See Chapter IV of this document for more discussion.
In the case of Croatia, expenditure on additional maternity benefits and equipment for newborn children is classified as social security and welfare expenditure. It could, however, also be classified under health expenditure.
As discussed in Chapter IV, Croatia intends to increase retirement ages significantly as part of its pension reform plans.