Saturday, 17 July 2021

19 Percent of Croatian Citizens Have Borrowed Funds Since Pandemic Struck

July the 17th, 2021 - When it comes to Croatian citizens or residents, every fifth one has had to borrow funds since the beginning of the coronavirus pandemic back in spring last year in order to remain financially afloat.

As Novac/Andrea Koscec writes, since the beginning of the pandemic, every fifth respondent in Croatia has been forced to borrow money. Working with that very same figure, every fifth person was also rendered unable to pay back the debts they'd incurred/

The above information about the financial issues suffered by Croatian citizens during the pandemic was showcased by COVID-19 inspired financial research conducted in European countries by the company EOS Matrix.

According to the survey, Croatian citizens or residents most often had to borrow money in order to just meet their daily needs - to finance their current living expenses (69 percent), housing costs (30 percent) and healthcare costs (23 percent).

''From the attitudes of Croatian citizens about borrowing money, we can conclude that the coronavirus crisis will have a longer-lasting effect on the financial situation of people and the weakening of the national economy,'' noted the director of EOS Matrix, Barbara Cerinski.

The survey showed that most Croatian citizens or residents gave up investing in renovation (45 percent), buying furniture (31 percent) and spending money on trips and holidays (25 percent), the same could be said for spending on healthcare (14 percent) or education (11 percent).

At the wider European level, it is evident that individual countries have been and continue to be quite differently exposed to the consequences of the ongoing pandemic - while in Croatia, 19 percent of consumers are indebted financially, in Germany that figure stands at 12 percent, in Spain 15 percent, and in Romania as much as 28 percent, with 32 percent of people in Bulgaria in the same boat as a result of the global public health crisis.

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Wednesday, 8 April 2020

Public Debt at 73.2% of GDP at End of 2019

ZAGREB, April 8, 2020 - Croatia's public debt at the end of 2019, expressed according to the ESA 2010 methodology, totalled HRK 293 billion or 73.2% of GDP, which is 1.6 percentage points less compared to the end of 2018, shows data from the Croatian National Bank (HNB).

The share of public debt in GDP thus dropped for the fifth consecutive year but in absolute terms, at the end of last year it was HRK 6.9 billion higher than at the end of 2018.

The factors that contributed to the relative decrease of public debt last year were the continuation of favourable fiscal trends, which reduced the state's need for borrowing, a high level of liquidity and the continuation of a period of low interest rates, say analysts of Raiffeisen Bank (RBA).

That, they say, improved borrowing terms on the domestic and international financial markets and contributed to a lowering of interest rates, which reduced interest expenses and improved the debt maturity structure.

The analysts say that the drop in the share of public debt in GDP is also the result of a solid real economic growth of 2.9%.

According to the currency structure, the external component of public debt (HRK 95.8 billion) dropped by eight billion kuna on the year or 8.6% while the internal component grew by 8.7% to HRK 197.2 billion, accounting for 67.3% of the total public debt.

Considering the coronavirus pandemic, unfavourable economic trends will not bypass Croatia either and the government's measures designed to help alleviate the slowing down or suspension of economic activity require a significant increase in the expenditure side of the budget, the analysts say.

They believe that the state will resort to new borrowing on financial markets to bridge the budget deficit, either through credit lines or on capital markets, which, they say, coupled with the decline in economic activity, will have a negative impact on the general government's public debt, both in nominal and real terms.

That is why apart from a decline in economy analysts also expect the share of the general government's debt in GDP to increase to above 80%, which was last recorded in 2016.

They say that an additional factor that will contribute to an increase in the share of the debt in GDP is the weakening of the kuna in relation to the euro.

More economic news can be found in the Business section.

Monday, 30 March 2020

Croatia's Gross External Debt Falls to 41.1 Billion Euro

ZAGREB, March 30, 2020 - Croatia's gross external debt reached €41.1 billion at the end of November 2019, down by 1.6 billion or 3.8% compared with November 2018, but analysts predict a rise in external vulnerability caused by the coronavirus pandemic.

Compared with October 2019, external debt - which includes the external debt of the general government, the central bank, other monetary and financial institutions and other domestic sectors as well as direct investment - fell by 4.5%.

In the debt structure, the largest share, of 41.3%, accounted for other sectors, i.e. companies that had started to generate positive annual growth rates after three years od deleveraging.

The gross external debt of the public sector was €15.3 billion, a decrease of 8% compared with the end of 2018. The largest portion of this amount, €12.9 million, was owed by the central government, although its debt had been reduced by 7.3%. This was due to the maturity of a $1.5 billion bond which reduced the government's external liabilities, analysts at Raiffeisen Bank (RBA) said.

Although the indicators for December will confirm a relative fall in external debt to 75.7% of GDP (by seven percentage points compared with the end of 2018), the new circumstances caused by the coronavirus pandemic will adversely affect relative external debt indicators already this year, RBA said.

It warned that a significant decline in economic activity, coupled with the high levels of external liabilities accumulated over the previous years, will lead to a deterioration in the country's external vulnerability.

More economic news can be found in the Business section.

Thursday, 23 January 2020

Gross Foreign Debt to GDP Ratio 81%

ZAGREB, January 23, 2020 - At the end of the third quarter of 2019, Croatia's gross foreign debt to GDP ratio amounted to 80.9%, which is 1.7 percentage points less than at the end of 2018, Croatian National Bank (HNB) data indicate.

In absolute numbers the debt increased by 1.3% compared with December 2018 and amounted to 43.3 billion euro at the end of September 2019. The HNB notes that the increase was impacted by cross-currency changes and other adjustments.

Broken down by sector, the greatest portion of the debt (39%) can be attributed to other sectors or companies.

The gross foreign debt of companies at the end of Q3, 2019 amounted to €17.1 billion. The general government's foreign debt amounted to €14.4 billion, and accounted for 32.6% of the overall debt, while the share of dues by other monetary institutions decreased to 8.1% or €3.6 billion due to strong deleveraging over the past several years (2012 - 2018).

The increase in foreign debt in the first nine months of last year was generated by an increase in liabilities by the public sector with its gross foreign debt to foreign creditors amounting to €17.6 billion at the end of September 2019, an increase of 6.4% or €1.1 billion compared with the end of 2018.

With its debt of €14.4 billion, the government was the greatest public sector debtor, with its debt increasing by €414 million from the end of 2018 while the central bank's debt of €2 billion was €390 million or 23.6% higher than at the end of 2018.

The non-guaranteed debt of the private sector at the end of September 2019 was slightly below the level recorded at the end of 2018 and amounted to €25.5 billion.

More news about economy in Croatia can be found in the Business section.

Tuesday, 5 November 2019

Croatia's Public Debt Rises to 297.1 Billion Kuna

ZAGREB, November 5, 2019 - Croatia's public debt reached HRK 297.1 billion at the end of July 2019, up by 11 billion kuna or 3.8% from the end of 2018, and the increase was due to the issue of a €1.5 billion euro bond in June to secure funds for the repayment of a bond maturing in November, data from the Croatian National Bank shows.

In addition, the slight strengthening of the domestic currency, the kuna, against the euro affected the nominal expression of the debt in the kuna given that about 65% of general government obligations are in the euro or are tied to the euro, Raiffeisenbank Austria (RBA) said on Tuesday in a comment on the latest data from the Croatian central bank.

The level of public debt was also affected by a data review following the resectorisation of several statistical units into the general government sector.

General government internal debt was 186.7 billion kuna, an increase of 3.5% from the end of 2018, while external debt rose by 4.4% to 110.4 billion kuna.

RBA analysts recalled that $1.5 billion debt arising from a euro bond issued in 2009 would fall due in November and that it would be covered with funds from the euro bond issued this June. In addition, a €1 billion bond issued on the domestic market with a foreign currency clause also matures in November and the government is expected to issue another bond on the domestic market this month, which would conclude (re)financing for this year.

Considering the economic environment, solid fiscal improvements and the investment rating, a further slight narrowing of spread, especially at the longer end of the curve, is not ruled out.

For the government, borrowing under such terms means considerable savings on interest costs, which had been reduced in the last three years by nearly 3 billion kuna or 25% and reached 2.3% in 2018.

"Considering the fundamental indicators and the market environment, we believe that yields (and coupon interest rates) will reach new all-time lows," RBA said.

As for refinancing needs, RBA analysts believe that 2020 will be somewhat less demanding and the needs easily met, estimating them at 14% of GDP or 57.5 billion kuna.

More economic news can be found in the Business section.

Tuesday, 27 August 2019

Croatia Issues Euro Treasury Bills at Negative Interest Rate

ZAGREB, August 27, 2019 - After on Tuesday the Ministry of finance auctioned off 32 million euro in treasury bills, at a negative interest rates of - 0.05%, Finance Minister Zdravko Marić welcomed the fact that the treasury bills were issued at a negative interest rate.

This is the first time Croatia issued treasure notes at a negative interest rate and Minister Marić hailed that as good information.

Earlier in the day the ministry issued treasure bills for 81 million kuna with a maturity of one year and at an interest rate of 0.01 percent, which was down by 0.01 percentage point lower than last week's auction.

The ministry issued also treasury notes for 32 million euro with a maturity rate of a year and at a negative interest rate (-0.05%), which means that financial institutions will actually pay the Finance Ministry to keep their money in the form of those securities.

These transactions were conducted ahead of the maturity of treasury bills worth 199 million kuna and 50 million euro.

The balance of the treasury bills issued in kuna will be reduced by 118 million kuna to 17.84 billion kuna.

The balance of the euro-denoted treasury bills goes down by 18 million to 100.6 million euro.

More economic news can be found in the Business section.

Tuesday, 20 August 2019

Finance Ministry Issues 1.19 Billion Kuna in Treasury Bills

ZAGREB, August 20, 2019 - The Croatian Ministry of Finance on Tuesday auctioned off nearly 1.19 billion kuna in treasury bills, which was more than planned, still at low interest rates.

The ministry had offered 1 billion kuna worth of treasury bills for subscription ahead of the maturity of treasury bills worth 1.15 billion kuna. It received offers for 1.18 billion kuna and accepted them all.

The bills were issued for 1.17 billion kuna with a maturity of one year and at an interest rate of 0.08 percent, which is the same percentage point as at the previous auction at the end of June. Furthermore, 200 million was auctioned off with a maturity rate of six months at an interest rate of 0.05 percent.

The balance of the treasury bills issued will be increased by 36 million kuna to 17.96 billion kuna.

The next auction is set for August 27 via Bloomberg's auction system (BAS).

More economy news can be found in the Business section.

Tuesday, 13 August 2019

Croatia's Gross Foreign Debt Close to 40 Billion Euro

ZAGREB, August 13, 2019 - At the end of April 2019, Croatia's gross foreign debt totalled 39.9 billion euro, 1.1 billion or 2.9% more than at the end of 2018.

Raiffeisen Bank analysts have said that the increase in the gross foreign debt is due to the usual seasonal worsening of credit institutions' international position (in the amount of 347.5 million euro, an increase of 8.5%) and an increase in the central bank's foreign debt of 1.4 billion euros.

The central government's foreign debt rose slightly, by 0.7%, while other domestic sectors reduced their gross obligations, the analysts said.

The statistics for April confirm a continued decline of the foreign debt that has been going on since the end of 2015, with sporadic exceptions in June 2018 and February 2019.

The biggest contribution to the year-on-year reduction of the foreign debt came from the public sector. At the end of April, the general government's gross foreign debt totalled 13.8 billion euro, which was 458.8 million euro or 3.2% less than in the same month of 2018, the analysts say.

They note that the annual decrease in the gross debt was also owing to a continued deleveraging in other domestic sectors whose gross foreign debt at the end of April dropped to 13 billion euros (-3.4%), continuing deleveraging trends that have been going on since January 2016.

These trends were mostly owing to deleveraging in the private business sector, whose gross foreign debt at the end of April dropped to 9.4 billion euro, 2.4% less than in the same period of 2018. The share of the gross foreign debt of other domestic sectors in the total gross foreign debt dropped to 32.5% from 34.3% at the end of December 2018, which reflects a continued decline in foreign borrowing that has been replaced by kuna loans taken from domestic banks.

April saw a continuation in the growth of borrowing by domestic banks, whose gross debt at the end of that month amounted to 4.4 billion euro (+8.2% from April 2018 and +8.5% from the end of 2018).

The share of the financial sector's gross debt in the total gross foreign debt rose from 10.5% in December 2018 to 11.2% at the end of April 2019.

Analysts attribute the increase in borrowing by the banking sector that started at the end of 2018 to a growing demand for loans, notably non-purpose cash loans.

They note that statistics for May and June could confirm a temporary increase in the central government's obligations towards foreign creditors after the government in June issued 1.5 billion euro worth of ten-year euro bonds to repay an international bond issued in November in the amount of 1.5 billion US dollars.

As for the whole 2019, analysts expect continued improvement of debt statistics.

More economic news can be found in the Business section.

Tuesday, 23 April 2019

Croatia's 2018 Government Surplus at 0.2%, Debt at 74.6% of GDP

ZAGREB, April 23, 2019 - Croatia recorded a consolidated general government budget surplus of 758 million kuna in 2018, which is 0.2% of GDP, and a consolidated general government debt of 284.7 billion kuna, which is 74.6% of GDP, according to figures released by the National Bureau of Statistics (DZS) on Tuesday.

It was the second year in a row that Croatia had run a consolidated general budget surplus, but it was lower than in 2017, and the general government debt to GDP ratio continued to decline.

The DZS submits a report on general government budget deficit and debt to the European Commission, namely to Eurostat, twice a year, in April and October, using the ESA 2010 methodology and the Manual on Government Deficit and Debt.

Last year, Croatia's consolidated general government surplus was 758 million kuna, or 0.2% of GDP, while in 2017, it was 2.9 billion kuna, or 0.8% of GDP.

Previously, Croatia recorded budget deficits, which totalled 3.4 billion kuna, or 1% of GDP, in 2016 and 10.8 billion kuna, or 3.2% of GDP, in 2015.

The 2018 surplus was the result of a further fall in the government budget balance compared with the previous year, from 2.29 billion kuna to 191 million, as a result of positive economic developments, the DZS said.

The surplus was mostly driven by the considerably improved financial result of extrabudgetary beneficiaries and public companies and by increased tax revenues.

In 2018, taxes on production and imports totalled 76.8 billion kuna, an increase of 7.2% on the previous year.

The surplus was also spurred by a decline in interest expenses, which reached 8.88 billion kuna, down by 9.1% from 2017. By comparison, interest expenses were 11.81 billion kuna in 2015, 10.83 billion kuna in 2016 and 9.77 billion kuna in 2017.

Investment grew by 33.8% from 2017 to 13.21 billion kuna.

The DZS noted that last year 2.53 billion kuna was paid for enforced guarantees for the shipyards, which led to the reduction of the surplus.

In 2018, the primary general government surplus was 9.64 billion kuna, or 2.5% of GDP, which is 23.9% less than in 2017.

At the end of last year, consolidated general government debt was 284.7 billion kuna, or 74.6% of GDP, while in 2017 it was 284.3 billion kuna, or 77.8% of GDP. In 2016, debt was 282 billion kuna, or 80.5% of GDP, down from 284.4 billion kuna, or 83.7% of GDP, in 2015.

Despite the debt increase, the share of consolidated general government debt in GDP has continued to decline in the last four years, falling by 3.2 percentage points of GDP from 2017 to 74.6% of GDP in 2018.

In nominal terms, the debt increased by 379 million kuna or 0.1%.

The rise in net borrowing (2.7 billion kuna) was almost offset by negative exchange rate differences (minus 2.3 billion kuna).

The DZS noted that the level of consolidated general government debt at the end of 2016 and 2017 was about 1 billion kuna higher than the data presented in the October 2018 notification due to further alignment with the ESA 2010 methodology.

More economy news can be found in the Business section.

Tuesday, 5 March 2019

Croatia's Foreign Debt Down 4.5%

ZAGREB, March 5, 2019 - Croatia's gross foreign debt at the end of November 2018 totalled 39.1 billion euro, 1.9 billion or 4.5% less than the year before, analysts at Raiffiesenbank Austria (RBA) have said, noting that the foreign debt to GDP ratio is expected to continue to fall.

"The current dynamic of the annual debt decline has been going on since December 2015," the analysts said in a comment on figures recently published by the Croatian National Bank (HNB).

The reduction of the foreign debt is due to an 11.7% drop in the debt of other monetary financial institutions, a 5.1% drop in the foreign debt of other domestic sectors and a decline in the general government foreign debt of 8.2%.

The gross foreign debt of other domestic sectors at the end of November was 13.47 billion euro, continuing the trend of deleveraging that started in January 2016, the RBA analysts said in their analysis.

The general government gross debt at the end of November was 13.5 billion euro, 8.2% less than the year before.

"Negative annual growth rates were recorded for the third consecutive month. The annual gross debt growth was reported only for the central bank, of 275 million euro or 13.1%, and for direct investments," the analysts said.

They expect that data for December 2018 will indicate a continuation of similar trends and that at the end of 2018 the foreign debt to GDP ratio should be below 75%.

Owing to positive economic trends and further deleveraging in all key sectors, the RBA analysts expect the share of gross debt in GDP to continue falling this year as well.

More news on the debt issues can be found in the Business section.

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