GOVERNMENT DEFICIT AND DEBT (EDP) STATISTICS

NOTES ON METHODOLOGY

Data description

Government Finance Statistics (GFS) form the basis for fiscal monitoring in Europe, most notably for the statistics related to the Excessive Deficit Procedure (EDP). The EDP is established in the Treaty on the Functioning of the European Union (TFEU) and specified in the Stability and Growth Pact.

The Republic of Croatia reports data related to the EDP to the European Commission (Eurostat).

European GFS, including the statistics for the EDP, are produced in accordance with Regulation (EU) No 549/2013 of the European Parliament and of the Council on the European System of National and Regional Accounts (ESA 2010). They are supplemented by further interpretation and guidance from Eurostat, in particular the Manual on Government Deficit and Debt (MGDD).

Council Regulation (EC) No 479/2009, as amended, requires Member States to report government deficit/surplus and debt data related to the EDP twice per year: before 1 April and 1 October. The data are reported in harmonised tables. These tables are designed specifically to provide a consistent framework, with a link to national budgetary aggregates and between the deficit and changes in the debt. They should be fully consistent with GFS data delivered to Eurostat under the ESA 2010 Transmission Programme.

The EDP notification tables contain for general government and its subsectors:

· Table 1: Summary table on deficit and debt, including auxiliary indicators (gross fixed capital formation, interest expenditure and gross domestic product – GDP);

· Tables 2A–2D: Transition from the working balance to the deficit/surplus for general government subsectors;

· Tables 3A–3E: Transition from the deficit/surplus to the change in debt for general government and its subsectors;

· Table 4: Supplementary data.

The EDP data disseminated by the Croatian Bureau of Statistics are presented in millions of euro and in percentage of GDP, where applicable.

Classification system

The classification system is defined in ESA 2010 and comprises the classification of institutional sectors and the classification of transactions, other flows and balance sheet items (assets/liabilities).

Data cover the general government sector (S.13) and its subsectors.

The general government sector consists of the following subsectors:

· central government (S.1311);

· state government (S.1312);

· local government (S.1313);

· social security funds (S.1314).

For the Republic of Croatia, the state government subsector (S.1312) is not applicable.

Statistical concepts and definitions

The concepts for EDP statistics are explained in Council Regulation (EC) No 479/2009, as amended, and Regulation (EU) No 549/2013 of the European Parliament and of the Council (ESA 2010) and subsequent legal amendments, supplemented by further interpretation and guidance from Eurostat, in particular the Manual on Government Deficit and Debt (MGDD).

The government deficit/surplus is the net borrowing/net lending (B.9) of general government, as defined in ESA 2010. It is the difference between the revenue and the expenditure of the general government sector.

The government debt is defined as the total consolidated gross debt at nominal (face) value at the end of the year in the following categories of government liabilities, as defined in ESA 2010:

· currency and deposits (AF.2);

· debt securities (AF.3);

· loans (AF.4).

At the national level, data for the general government sector are consolidated between subsectors.

The working balance is the most often used concept and measure of the country's budget deficit/surplus as it generally appears in public accounts and budgetary presentations. The working balance is the starting line in EDP Tables 2A–2D. For central government, it corresponds to the budgetary outcome (surplus/deficit) contained in the Annual Report on the Execution of the State Budget of the Republic of Croatia, adopted by the Croatian Parliament.

The deficit and debt data are reported by subsectors of general government: central government (S.1311), local government (S.1313), and social security funds (S.1314).

Content of EDP tables

Table 1 – Government deficit/surplus, debt and associated data

Table 1 provides a summary view for the reference years showing:

· the net lending (+) / net borrowing (–) (ESA surplus / deficit) for the general government sector and its subsectors;

· the general government gross debt by instrument;

· interest expenditure of general government,

· gross fixed capital formation of general government;

· GDP.

Tables 2A–2D – Transition from the working balance to the deficit/surplus

Tables 2, which consist of the four separate tables (2A, 2B, 2C, and 2D), present the link between the so-called working balances (usually the public surplus (+) / deficit (–) as reported nationally to the Parliament) and the net lending (+) / net borrowing (–) for each general government subsector.

Working balances need to be adjusted for operations that are not included in them, but are nevertheless considered, in national accounts, as part of government operations and impact the surplus (+) / deficit (–), for example many cases of capital injections.

Working balances also need to be adjusted for operations that were included in them, while having no impact on surplus (+) / deficit (–). Usually, these are financial transactions contained in the working balance that have no effect on the ESA surplus (+) / deficit (–), for example loans granted by the government directly from the budget.

The transition from the working balance to the deficit/surplus in EDP Tables 2A–2D is explained by the following items:

· financial transactions included in the working balance;

· non-financial transactions not included in the working balance;

· difference between interest paid and accrued;

· other accounts receivable / other accounts payable;

· working balance of entities not part of central government;

· net borrowing (+) / net lending (–) of other central government bodies;

· other adjustments.

Tables 3 – Transition from the deficit/surplus to the change in debt

Tables 3, which consist of the five separate tables (3A, 3B, 3C, 3D, and 3E), present the link between the government net lending (+) / net borrowing (–) (ESA surplus / deficit) and the change in government debt.

Whereas the change in debt over a single reference period is mainly driven by the deficit/surplus of that period, other effects may also contribute. As an example, for a given deficit (meaning an excess of expenditure over revenue), higher net acquisitions of financial assets lead to higher borrowing needs and therefore, likely, a higher change in debt.

The types of transactions reconciling the deficit/surplus of any given reference period to the change in the debt of that same period are generically called stock-flow adjustments.

The transition from the deficit/surplus to the change in debt is explained by the following items:

· net acquisition of financial assets:

o currency and deposits (F.2);

o debt securities (F.3);

o loans (F.4);

o equity and investment fund shares/units (F.5);

o financial derivatives (F.71);

o other accounts receivable (F.8);

o other financial assets (F.1 and F.6);

· net incurrence (-) of liabilities in financial derivatives (F.71);

· net incurrence (-) of other accounts payable (F.8);

· net incurrence (-) of other liabilities (F.1, F.5, F.6 and F.72);

· issuances above/below nominal value;

· difference between interest (D.41) accrued and paid;

· redemptions/repurchase of debt above/below nominal value;

· appreciation/depreciation of foreign-currency debt;

· changes in sector classification (K.61);

· other volume changes in financial liabilities (K.3, K.4, K.5);

· difference between capital and financial accounts (B.9-B.9f) and other statistical discrepancies.

EDP table 4 – Associated data

Table 4 shows supplementary information on:

· the stock of trade credit liabilities of general government;

· the amount outstanding in the government debt from the financing of public undertakings;

· the extent and the reasons in case of substantial differences between the face value and the market value of government debt;

· the gross national income (GNI) of the EU Member States.

Coverage and reference period

EDP data refer to the reference years covered by the Excessive Deficit Procedure Report (EDP Report).

The EDP Report refers to the preceding four-year period; current-year data are based on the Ministry of Finance forecast.

The reference period is the calendar year.

Stocks, such as government debt, are as at the end of the calendar year.

Publication of data

The Croatian Bureau of Statistics publishes the Excessive Deficit Procedure Report with associated EDP data twice a year, following the April and October EDP notifications.