The trend of the Republic of Croatia’s foreign debt falling on an annual basis has been going on since the end of 2015, according to RBA analysts in light of their review of the recently published data of the Croatian National Bank (CNB/HNB).
As Poslovni Dnevnik writes on the 5th of February, 2019, at the end of October last year, Croatia’s gross foreign debt amounted to 38.4 billion euro, which is less by as much as 4.1 percent when compared to one year before, meaning that the country’s foreign debt fell to its lowest level since back in September 2008, according to a new analysis carried out by Raiffeisenbank Austria (RBA).
RBA pointed out, in addition to the fact that the falling of Croatia’s foreign debt has been a trend since 2015, that the fall of this debt in October in particular is the result of a decline in the debt(s) of other financial institutions, which fell by 13.1 percent, as it also did in other similar sectors.
Thus, the gross foreign debt of other Croatian (domestic) sectors dropped to 13.5 billion euro at the end of October, or by 5.3 percent year-on-year, continuing the trend of depreciation dating from January 2016, as was stated on Tuesday.
The gross foreign debt of the state amounted to 13.7 billion euro at the end of October, which was 0.4 percent less than it was one year earlier. The growth of Croatia’s gross foreign debt at an annual level was recorded only in direct investments, by 4.4 percent, to 6.3 billion euro.
“We expect the data for the last two months of 2018 to point to the continuation of similar developments, and at the end of 2018, the relative indicator of external borrowing should be below 75 percent of GDP,” RBA analysts point out.
They expect that this year’s debt to gross domestic product (GDP) will decline, thanks to the growth of the domestic economy and further diversification of all of Croatia’s key sectors. “Further reductions in debt in the corporate sector are expected as a result of the discrepancies in the cost of financing on domestic and foreign financial markets,” analysts from RBA have stated.
However, a tightening monetary policy and worsening funding conditions in regional and global financial markets could warn of a potentially negative impact.
“[This is particularly concerning] in the case of Croatia’s modest progress in the implementation of structural reforms, which leads to an increase in risk perception and, consequently, the risk premium of the country itself,” concluded RBA’s financial analysts.
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