The gross external debt of Croatia at the end of January was €40 billion, down by €2.1 billion or 5 percent from January 2017, which continues its downward trend since late 2015, Raiffeisenbank Austria (RBA) analysts said in a report published on Monday.

“The biggest contributing factor to the year-on-year reduction in the national external debt was the continued de-leveraging of businesses, whose total gross external debt dropped to €13.5 billion in January 2018, or by 5.3 percent, in a trend that has been going on since January 2016,” RBA analysts said, commenting on figures recently released by the central bank.

The largest drop in debt was in the privately-owned businesses sector, with their debt totalling €9.8 billion at the end of January, or 6 percent down year-on-year.

Another contributing factor was the debt reduction of the public sector. In January 2018, the general government’s gross external debt was €13.9 billion, down by €820 million or 5.6 percent compared to the same month in 2017.

“Better than expected fiscal indicators have resulted in the general government’s lower external debt and the government’s increased focus on turning to the domestic market for financing,” analysts added.

January also saw the continuation of de-leveraging in the finance sector, i.e. banks. The sector’s total gross external debt was €3.9 billion, down by €416 million from January 2017.
RBA analysts said they expected the reduction of the gross external debt to continue in year-on-year terms, due to the de-leveraging of all key sectors of the economy.

“Considering the plentiful liquidity in the system, in an environment marked by low interest rates, businesses are likely to continue re-financing some of their external debt using loans in the domestic market,” they added.

Analysts added that in early July some €750 million of government’s euro-denominated bonds issued in 2011 are due to mature.

“We expect the government to re-finance them with a new bond issue, probably before the maturation date. Current conditions in the international financial markets point to favourable terms for loans, which will result in improved indicators of external debt,” the report said.

With the expected GDP growth in 2018, they added that the external debt to GDP ratio might drop below 80 percent by the end of the year.

Follow N1 via mobile apps for Android | iPhone/iPad | Windows| and social media on Twitter | Facebook.