At the end of 2021, Croatia's general government debt totaled 343.6 billion kuna (€45 billion), up 4 percent year-on-year, and Raiffeisenbank Austria (RBA) analysts estimate that it will continue to increase, state agency Hina said.

According to central bank figures, the general government debt at the end of last year was 0.5% lower than at the end of November.

The debt-to-GDP ratio at the end of last year was 79.6%, 7.7 percentage points lower than at the end of 2020, whereby it resumed to decrease after the coronavirus crisis. According to RBA, this was primarily a result of the strong 10.4% economic growth in 2021.

RBA analysts expect the debt to continue to increase this year due to stronger pressure on the state budget’s expenditure side resulting from union demands for higher pay at a time of marked inflationary pressures as well as from the fiscal measures undertaken to mitigate the impact of price hikes on consumers and enterprises.

The continued recovery of economic activity, albeit slower, will keep the public debt-to-GDP ratio on the downward scale this year as well as in the years ahead, RBA says.

The availability and absorption of EU funds this year and in the years ahead is expected to significantly mitigate the blow to public finance, the bank’s analysts say.

They expect a stepped-up absorption of funds from the 2021-27 EU budget as well as from the Next Generation EU instrument and the European Solidarity Fund for post-earthquake reconstruction.

(€1 = 7.57 Kuna)