Croatia’s External Debt Falls Under 40 Billion Euro

By 6 February 2018

ZAGREB, February 6, 2018 - Croatia's gross external debt at the end of October 2017 totalled 39.9 billion euro, 2.6 billion or 6.1% less than in the same month of 2016, with the general government sector leading in the deleveraging, the latest analysis by Raiffeisenbank Austria (RBA) says.

Compared to the end of 2016, the foreign debt in October 2017 was 1.7 billion kuna or 4% lower.

The general government sector contributed the most to deleveraging, with its gross foreign debt going down by 7.4% or EUR 1.1 billion since the end of 2016, RBA analysts say in a comment on figures published recently by the Croatian National Bank (HNB).

The general government external debt at the end of October 2017 totalled 13.7 billion euro while the total foreign debt of the entire public sector, which along with the general government consists also of the debts of public non-financial companies, the Croatian National Bank, the Croatian Reconstruction and Development Bank, and the public sector's debts related to direct investments, amounted to 17.1 billion euro.

Deleveraging was also reported in other domestic sectors, made up mostly of private non-financial companies. The total debt in that category at the end of October 2017 was 14.2 billion euro, which is almost 900 million euro or 5.9% less than at the end of 2016.

Deleveraging was also registered in the category "Other monetary financial institutions", which covers banks, savings banks and housing savings banks as well as money funds. The total foreign debt in that category at the end of October was 3.8 billion euro, which is 16.2% or 736 million less than at the end of 2016.

RBA analysts note that the lower interest in foreign borrowing is due to lower interest rates on loans and high liquidity on the domestic market.

The total debt of the road sector, that is the Hrvatske Ceste (HC), Hrvatske Autoceste (HAC) and Autocesta Rijeka-Zagreb (ARZ) road operators, is 5.1 billion euro, and a large portion of the debt falls due in the next two to three years. "If they are refinanced, the less favourable loans will be replaced with loans with lower interest rates and more favourable repayment periods," the analysts said.

They note that in early July a 750 million euro government bond issued in 2011 will fall due and that the government will refinance it with a new bond probably to be issued under more favourable terms, which would also contribute to better foreign debt indicators.

"We expect the share of the gross foreign debt in GDP to lower to below 80% by the end of the year," the analysts said.