Public debt of Croatia has jumped to nearly 300 billion kuna!

The total public debt calculated according to the ESA 2010 methodology at the end of the first quarter of this year amounted to 298.8 billion kuna, which is 74.3 percent of GDP and 1.1 percentage points higher share of GDP than at the end of last year, and analysts say that its further growth is inevitable. In absolute terms, compared to the end of 2019, public debt increased by 5.9 billion kuna or two percent.

Data for March confirm the beginning of unfavorable trends in public debt due to the economic slowdown introduced to curb the pandemic, say analysts from Raiffeisen Bank (RBA), noting that the increase in public debt in the first quarter is also a result of the government’s borrowing on the capital market through the issuance of bonds. Namely, in the first quarter, 15 billion kuna of bonds were issued on the domestic capital market.

As the year progressed, the newly emerged circumstances increased the financing needs, leading to additional borrowing. Therefore, at the beginning of May, an issuance of 1.445 billion euros was realized, in June, two billion euros of foreign eurobond issuance followed, while at the beginning of June, the state borrowed an additional five billion kuna on the domestic market.

"Although the government has closed the financing needs for this year with previous issuances, the latest borrowing is not surprising considering the expected strong contraction of the economy, lower inflows into the state budget, and potential additional financing needs as well as the possibility of pre-financing for 2021. Consequently, the growth of general government debt is inevitable, and with the economic decline, the ratio of public debt to GDP will return to levels above 80 percent, last recorded in 2016," says the comment from RBA analysts. According to government projections, with a real annual GDP decline of 9.4 percent, the ratio of public debt to GDP will reach 86.7.

Looking at the currency structure, at the end of the first quarter, the external component of public debt (100.8 billion kuna) increased by 5.1 billion kuna or 5.4 percent compared to the end of 2019, while the internal component, with an increase compared to the end of 2019 of 0.4 percent, was at the level of 198 billion kuna at the end of March 2020, accounting for 66.3 percent of total public debt.

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