Croatian public debt at the end of March this year amounted to 281.3 billion kuna, according to the latest data from the Croatian National Bank (HNB), which represents 76.2 percent of GDP, while analysts from Raiffeisenbank Austria (RBA) expect a continued reduction in its share of GDP.
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Expressed according to the ESA 2010 methodology, Croatia’s public debt at the end of the first quarter was 281.3 billion kuna, which is an increase of 936 million kuna or 0.9 percent compared to the end of February. As noted by RBA, this increase reflects the growth of the central government’s external debt based on long-term government securities.
In comparison to March 2017, however, public debt has decreased by 11.4 billion kuna. The annual reduction in public debt was contributed by a decline in both components of public debt.
The external component of public debt was lower by 4.7 billion kuna or 4.1 percent year-on-year, thanks to a reduction in the foreign debt of the general government based on long-term debt securities and loans. At the same time, the internal component decreased by 6.6 billion kuna or 3.7 percent, as a result of reduced obligations from general government loans.
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Compared to the end of 2017, the general government’s debt is lower by 2 billion kuna or 0.7 percent. These trends are also a result of favorable developments in budget statistics and the continued implementation of fiscal discipline, RBA points out. The strengthening of the domestic currency against the euro has also influenced these trends, as about 65 percent of the general government’s obligations are in euros or linked to the euro.
During this period, the share of public debt in GDP decreased by 1.2 percentage points.
“Given the expected continuation of economic growth this year, albeit at a somewhat slower pace, the share of public debt in GDP could continue to decline. The return of inflation and the strengthening of the kuna against the euro are additional factors that should contribute to the reduction of the public debt ratio in GDP. Furthermore, the still present environment of low interest rates seems favorable for partially and cost-effectively restructuring the portfolio structure of public debt,” RBA believes.
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Ultimately, they add, support for the fiscal metric certainly comes from expectations regarding the tourist (pre)season, which will act towards solid budget revenue.
“By keeping the growth of primary expenditures below the growth of nominal GDP, these trends will certainly have a positive impact on public debt statistics,” RBA concludes.
