It has slowed down but is growing – public debt 290 billion kuna or 86.7 percent of GDP

With the latest data on public debt, the Croatian National Bank has published a revised series of historical data from January 2000 due to further alignment with Eurostat methodology. According to the latest data, the share of public debt in GDP at the end of last year was 86.7 percent of gross domestic product, while at the end of 2014 it was 86.5 percent of GDP.

Public debt amounted to 289.7 billion kuna in December 2015, or 86.7 percent of GDP, which represents stagnation on a monthly basis, while on an annual basis, the debt increased by 1.9 percent, or 5.5 billion kuna, according to an analysis by Raiffeisenbank Austria (RBA).

– Given the higher nominal amount of GDP in 2015, the increase in the share of public debt in GDP has significantly slowed down on an annual basis compared to previous periods, analysts at RBA emphasize in the analysis published on Wednesday.

With the latest data on public debt, the Croatian National Bank has published a revised series of historical data from January 2000 due to further alignment with Eurostat methodology. According to the latest data, the share of public debt in GDP at the end of last year was 86.7 percent of gross domestic product, while at the end of 2014 it was 86.5 percent of GDP. In 2015, Croatian GDP grew by 1.6 percent, marking the first growth of the economy after six years of recession.

– The largest contribution to the annual growth of public debt primarily came from the borrowing of the central government, whose debt reached 284.6 billion kuna at the end of last year, which is 5.8 billion or 2.1 percent more compared to the previous year, RBA analysts state.

The stronger increase in total public debt on an annual basis was partially mitigated by a reduction in the annual borrowing of social security funds and local units, which account for less than 2 percent of total public debt.

– The trend of reducing state guarantees also marked the end of 2015, when their total amount was reduced by 757 million kuna, representing a year-on-year decline of 9.1 percent. Thus, at the end of 2015, total state guarantees (domestic and foreign) amounted to 7.6 billion kuna, as noted in the RBA analysis.

It is also noted that the government, in the budget for 2016, announced the stabilization of general government debt already this year, which, along with the reduction of the general government deficit, should also be supported by the expected revenue from privatization amounting to 1.6 billion kuna.

– However, the fact remains that the level of public debt, modest economic recovery, and high debt servicing costs warn of the high sensitivity of its sustainability, RBA analysts caution.

They point out that the share of interest expenses alone burdens the state budget with more than 11 billion kuna, which represents 3.5 percent of GDP and is among the highest levels in the European Union in relative terms.

– This emphasizes the need to limit growth, but also to change the structure of budget expenditures, while simultaneously improving the business environment and implementing structural reforms that would reduce the high exposure to risks threatening economic recovery, conclude RBA analysts.