The main reason is better than expected economic growth.
The gross external debt of Croatia amounted to 39.6 billion euros in late August, which was as much as 4.1 billion euros or 9.3 percent less than in the same month last year, mainly due to the government deleveraging and economic growth, announced Raiffeisenbank Austria (RBA) on Tuesday, reports Poslovni.hr on December 6, 2017.
“International deleveraging on the annual level was led by the general government sector, whose gross external debt has fallen by as much as 11.1 percent or 1.7 billion euros since the end of last year’s August,” said RBA analysts referring to the recently published data by the Croatian National Bank (HNB).
In August, the total external debt of the general government amounted to 13.35 billion euros, while the total external debt of the entire public sector which, in addition to the general government, includes the liabilities of public companies, the Croatian National Bank, the Croatian Bank for Reconstruction and Development, and obligations based on direct investments which relate to the public sector, amounted to 16.6 billion euros. Other areas have also recorded a decrease in the debt level. The largest share of debts is owed by private nonfinancial corporations and companies.
The total debt of all other domestic sectors in August was 14.36 billion euros, which was 8.7 percent or 1.4 billion euros less than in the same month last month. “The debt of private non-financial corporations decreased by 860 million euros, while the debt of public non-financial corporations decreased by 430 million euros,” the RBA analysts said on Tuesday.
The trend of decrease of foreign debt has continued in the category of other monetary financial institutions as well, which includes banks, savings banks, housing savings societies and cash funds. The total external debt of this group was down by 21.3 percent or one billion euros, compared to last August and amounted to 3.83 billion euros.
Analysts estimate that, due to the continued growth of the economy, the share of foreign debt in GDP at the end of 2017 could slide towards the level of 80 percent of GDP.
The decrease in the level of public debt is one of the primary economic goals of the government, and one of the rare positive news about the general Croatian economy. However, given the government’s propensity to increase public spending and the very real possibility that the current levels of GDP growth are not sustainable long-term, it is far from certain that the trend of lowering the share of debt in the GDP will continue.
