At the end of July 2020, Croatia’s public debt totalled HRK 325.4 billion, up 11.1% from the end of 2019, according to data released by the Central Bank.
The increase was linked to the response to the COVID-19 crisis, which increased the state’s financing needs in the wake of a strong drop in budget revenues, resulting from unfavourable economic trends and the financing of job-retention measures, Raiffeisenbank (RBA) analysts explain commenting on the data.
They note that the public debt increase at the end of July was due to the growth of both its components: The general government’s internal debt totalled HRK 219.9 billion, up 11.5% from the end of 2019, mainly due to an increase of the central government’s internal debt. The external component at the end of July totalled HRK 105.5 billion, up 10.2% from the end of 2019.
The bulk of the external debt reflects an increase in the central government’s foreign debt in long term securities and loans, RBA analysts argue.
They recall that, in the first quarter of the year, HRK 15 billion worth of bonds were issued on the domestic market, after which the unexpected situation -combined with an increased need for borrowing- implied additional issues.
In early July, the state borrowed HRK 5 billion on the local capital market. Including those issues, so far this year the government has issued €4.1 billion worth of bonds on the local market and €2 billion in eurobonds in June, raising the foreign component of the general government debt.
The third quarter passed in the usual roll-over of treasury notes. An additional HRK 5.5 billion in treasury notes is due by the end of the year.
This year’s fiscal situation will be significantly undermined, RBA analysts estimate, with public debt growth and a return to a negative fiscal balance. Combined with the economic downturn, the public debt-to-GDP ratio will again exceed 85%, last recorded in 2016.
In 2021, by dint of an expected economic recovery and lesser financing needs, general government debt-to-GDP ratio is expected to fall. /ibna
(€1 = HRK 7.5)