The general government debt at the end of May amounted to 5.9 billion more than a year earlier

The general government debt at the end of May this year amounted to almost 344 billion kuna, which is 5.9 billion or 1.7 percent more than a year earlier, according to the latest data from the Croatian National Bank (HNB), and analysts from Raiffeisenbank Austria (RBA) expect a continuation of its growth in absolute terms throughout the year due to increasing financing needs.

The annual increase in debt is caused by the rise in both domestic and foreign debt, according to the latest HNB data.

Thus, domestic debt is higher by 4.5 billion kuna or 2 percent compared to the end of May 2021, reaching almost 223 billion kuna, which is largely the result of the increase in the central government’s debt in terms of long-term securities and long-term loans. 

At the same time, foreign debt increased by 1.4 billion kuna or 1.2 percent, to 121 billion kuna.

Compared to the end of April, however, the general government debt decreased by 12.1 billion kuna. The reduction in general government debt on a monthly basis is the result of the settlement of a eurobond that matured on May 30, 2022, for which refinancing funds were raised through the April issuance of eurobonds in a total nominal amount of 1.25 billion euros, RBA points out. 

For the entire year, RBA analysts expect a continuation of the growth of general government debt in absolute terms due to increasing financing needs, primarily referring to increased pressures on the expenditure side of the budget due to union demands for wage increases in an environment of pronounced inflationary pressures, but also as a result of a series of fiscal measures to mitigate the adverse impact of rising prices on consumers and entrepreneurs.

– However, the continued recovery of economic activity will keep the public debt-to-GDP ratio on a downward trajectory both this year and in the years to come. Although fiscal risks are increasing, we expect to maintain the general government deficit at a level of 3 percent of GDP" – conclude RBA.  

The government expects that by the end of the year, the share of public debt in GDP should amount to 76.2 percent of GDP, or 3.6 percentage points lower compared to 2021.