Foreign investors held 37.5% of Croatia’s general government gross debt stock in 2016

Foreign investors held 37.5% of Croatia’s general government gross debt stock in 2016
Croatia is no longer subject to an excessive deficit procedure due to improvements in its budget metrics. The EC projects government debt will decline further to 79.4% of GDP in 2018, backed by strong nominal GDP growth. / bne IntelliNews
By bne IntelliNews June 20, 2017

Investors living outside of Croatia held 37.5% of the country's total general government gross debt stock in 2016 while resident financial corporations held the remaining 62.4%, data from the Eurostat showed on June 20. Resident non-financial sectors had no share in Croatia’s general government debt stock last year.

The EU's Economic and Financial Affairs Council (ECOFIN) closed on June 16 excessive deficit procedures (EDP) for Croatia, thanks to the improvements in the Adriatic country’s budget metrics. Croatia has been subject to an excessive deficit procedure since January 2014, when it was found to be in breach of both deficit and debt criteria. 

Non-residents had the highest share in Cyprus’ general government debt among EU members with 79.4% in 2016 while Malta had the lowest rate of foreign debt holders with 10.5%. Non-residents had 48.7% share in Bulgaria’s 2016 general government debt while this ratio stood at 48.4% in Romania and at 67.1% in Slovenia.

Only 6.5% of Croatia’s general government debt stock had a maturity of less than one year in 2016 while Sweden’s short-term debt ratio was the highest in the EU with 21.6%. Bulgaria’s short-term general government debt stock stood at 0.3% of the total in 2016, the lowest in the EU. Slovenia’s short-term debt amounted to 4.8% of the total last year while Romania’s ratio was 6.9%.

Based on the instruments, debt securities amounted to 64.8% of Croatia’s general government debt stock last year while loans had the remaining 35.2%. Croatian government had no currency and deposits in 2016.

Croatia’s general government debt-to-GDP ratio of 84.2% last year compared slightly worse than the EU average of 83.5%. Greece had the highest debt-to-GDP ratio of 179% in the EU in 2016, followed by Italy with 132.6%, while Estonia had the lowest ratio of 9.5%, followed by Luxembourg with 20%.

Croatia’s debt-to-GDP ratio compared unfavourably with its regional peers in 2016. Bulgaria’s general government debt stood 29.5% of its GDP last year while Slovenia’s debt-to-GDP ratio was 79.7% and Romania’s ratio was 37.6%.

The Croatian government aims to reduce public debt to 81.5% of GDP in 2017. Public debt is targetted to further decline to 78.6% of GDP in 2018 and 75.3% in 2019. 

Croatia's gross government debt to GDP ratio peaked at 86.7% in 2015 and fell to 84.2% in 2016. Croatia's public debt fell by 0.9% m/m and 1.6% y/y to HRK286.3bn (€73.4bn) in January.

The EC projects government debt will decline further to 79.4% of GDP in 2018, backed by strong nominal GDP growth.

Zagreb is targetting a general government deficit of 1.6% of GDP in 2017, according to the 2017 budget. Croatia’s consolidated general government deficit fell to HRK2.78bn or 0.8% of GDP in 2016 from HRK11.4bn or 3.4% of GDP in 2015. The EC forecasts the deficit will rise to 1.1% of GDP in 2017 and then fall back to 0.9% of GDP in 2018.

In its country-specific recommendations, the EC advised on May 22 that Croatia pursue its fiscal policy in line with the requirements of the preventive arm of the Stability and Growth Pact, which implies keeping to its medium-term budgetary objective in 2018. It says that Croatia should reinforce budgetary planning and the multi-annual budgetary framework, which includes strengthening the independence and mandate of the Fiscal Policy Commission by September 2017, according to the Commission.

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