Companies Borrowed Record HRK 10 Bn in April

Total Croatia News



ZAGREB, Aug 25, 2020 – In April 2020, companies in Croatia borrowed HRK 10 billion to finance overheads or rollover loans, which was a record high borrowing in the last five years, Vecernji List daily said on Tuesday.

At that time the COVID-19 pandemic halted the operations of almost one in five companies, notably those affected the most by social distancing, as a result of which their revenues in the first month of quarantine dropped over 90%.

Due to the latent danger of the reactivation of the same or similar viruses, companies whose business requires close contact with clients will have to restructure their business models, the Croatian National Bank (HNB) says in an analysis.

Borrowing in 2019 was dominated by new loans for current assets and investment, but since the epidemic outbreak, there have been virtually no investment loans. In March, April, and June, between 85,000 and 100,000 legal entities with nearly 600,000 employees in total received HRK 6 billion in job-retention aid. Over 90% of those entities were micro-enterprises.

The aid helped them to survive and swiftly adapt their operations, the HNB says, warning that extending non-selective aid in the long term could keep companies with untenable business models on the market as well, slowing down the redirecting of funds to healthy companies expected to help with economic recovery.

Zeljko Lovrincevic of the Zagreb Institute of Economics believes the demand for borrowing will increase because tax payment deferrals are no longer in force.

The HNB notes that many companies have swiftly adapted their business models through digitalisation and by relying on delivery channels for their goods and services. Some sectors have additionally profited such as IT solutions providers and courier services, the daily said.

(€1 = HRK 7.5)

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