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 central bank data.
Month on month, the public debt decreased 1.3%.
The increase was due to the response to the crisis caused by the COVID-19 pandemic, 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 say in a comment 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 is a result of an increase of the central government’s foreign debt in long term securities and loans, RBA analysts say.
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, this year to date the government has issued €4.1 billion worth of bonds on the local market and €2 billion in euro bonds in June, increasing 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 say, 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%, which was last recorded in 2016.
In 2021, thanks to an expected economic recovery and lesser financing needs, they expect the general government debt-to-GDP ratio to decrease.
(€1 = HRK 7.5)
