Croatia’s Public Debt Falls to 78% of GDP

By 5 April 2018

ZAGREB, April 5, 2018 - At the end of 2017, Croatia's public debt totalled 283.5 kuna billion and its share in GDP decreased for the third consecutive year, to 78%, and Raiffeisenbank Austria (RBA) analysts forecast that it will continue to decrease.

The decrease of the public debt-to-GDP ratio is a result of fiscal improvements, better borrowing conditions on the domestic and international financial markets, and economic growth, RBA analysts say in a comment on recent Croatian National Bank data. The central bank has revised data on the general government debt since January 2002.

According to the revised data, public debt at the end of 2017 totalled 283.5 billion kuna, 0.6% more than at the end of 2016. But since the economy grew by 2.8%, the public debt-to-GDP ratio decreased by 2.6 percentage points to 78%.

The ratio decrease for the third year is the result of the fiscal improvements which last year led to the first general government budget surplus, which reduced the need to borrow, RBA analysts say, adding that borrowing conditions improved thanks to high liquidity and low interest rates.

One of the factors that impacted the amount of the nominal debt expressed in the domestic currency was the kuna-euro exchange rate, RBA analysts say, recalling that nearly 75% of the debt is in euro or tied to the euro and that the kuna gained 0.6% against the euro year on year.

Since the economy is expected to continue to grow this year, the public debt-to-GDP ratio could continue to decrease.

The return of inflation and the strengthening of the kuna against the euro are expected to contribute to the decrease of the ratio, RBA analysts say, adding that thanks to high liquidity and low interest rates on the European and domestic financial markets, the government will successfully refinance its liabilities.