In August 2018 Croatia's public debt totalled 282.1 billion kuna (€38.1 billion), down by 0.5 percent or 1.4 billion kuna (€189.2 million) compared to the same month last year.

In spite of some 2.3 bilion kuna (€310.8 million) in state-issued bank guarantees for ships never delivered by the collapsing Uljanik shipyard, which are due to be paid by the end of the year, analysts still expect the public debt-to-GDP ratio at the end of the year to continue falling below the current six-year low.

In August the external component of the public debt grew 2.7 percent year-on-year, to 105 billion kuna, while the internal debt dropped by 0.8 percent to 177 billion kuna.

“Considering the recent developments in shipbuilding, we can expect increased budget spending by the end of the year, resulting from shipyard clients and banks claiming state-issued bank guarantees for ship contracts that Uljanik Group will not be able to deliver,” Raiffeisenbank Austria (RBA) analysts said in their comment on the recently released figures.

The government’s liabilities related to Uljanik’s failed contracts total 4.3 billion kuna, or around 1 percent of the national GDP. This includes at least some 2.3 billion kuna or 0.6 percent of GDP due to be paid by the end of 2018, plus interest and fees.

“This scenario would adversely affect the total budget balance, and in return the publid debt. However, even in that event, other budget trends will continue to be favourable. Combined with the projected economic growth, the public debt-to-GDP ratio would still continue falling,” RBA said.

Although the public debt has been growing in nominal terms, the debt-to-GDP ratio has been dropping because Cratia’s GDP growth outpaced the increase in debts. In Q3 2018 the national GDP grew by 2.8 percent year-on-year.

Thanks to this, RBA analysts said they expected the public debt-to-GDP ratio to be slightly above 75 percent by the end of the year.

In Q2 2018 the debt-to-GDP ratio was 76.1 percent, hitting the lowest level since 2012, when its stood at 69.4 percent.

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