Croatia's total public debt was 282.2 billion kuna (€38 billion) at the end of December 2018, down by 0.5 percent or 1.5 billion kuna (€200 million) from 2017, according to recently released data compiled by the central bank.
Month-on-month, the December 2018 public debt level dropped by 0.8 percent or 2.1 billion kuna. The report showed that the decline of public debt-to-GDP ratio continued for the fourth year in a row, dropping to 74.1 percent of GDP at the end of 2018.
Commenting on the latest report, Raiffeisen Bank Austria (RBA) analysts said on Wednesday that several key factors contributed to the lower debt levels, including good tax revenue which reduced the government’s need for borrowing, and lower interest rates due to good liquidity in both domestic and foreign markets, as well as the 2.6 percent GDP growth in 2018.
Another factor was the exchange rate, as the local currency kuna gained ground slightly against the euro (by some 0.6 percent in 2018) which lowered the total debt level when calculated in kuna.
The external component of public debt in December 2018 was 102.9 billion kuna (13.8 billion), down by 7.7 percent or 8.5 billion (€1.1 billion) year-on-year. On the other hand, the internal debt was 180 billion kuna (€24 billion), up by 4.1 percent year-on-year, and accounting for nearly 64 percent of the total public debt.
The debt-to-GDP ratio is expected to continue falling throughout 2019, RBA analysts said, as the kuna is likely to continue gaining ground against the euro, the government is likely to successfully continue re-financing its borrowing needs at favourable interest rates, as well as another solid tourist season which promises to help fill public coffers.
However, analysts warned, the 74.1 percent debt-to-GDP ratio is still higher than other countries in Central and Eastern Europe, where it hovers close to 50 percent on average, and Southeast Europe, where it is around 42 percent.
(€1 = 7.43 kuna)
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