Croatian government’s general gross debt stock expanded by 2.6% q/q to HRK300.1bn (€40.5bn) at the end of the first quarter of 2017, from HRK289.1bn at the end of 2016, data from Eurostat showed on July 20. Debt stock also rose by 1% on an annual basis as of end-March.

Consequently, Croatia's public debt to GDP ratio rose to 86.4% at end-Q1 from 83.7% at end-2016 and 85.4% at the end of the first quarter of 2016.

As of end-March, 57% of Croatia’s public debt was in the form of debt securities while loans had a 29.4% share in total debt. Debt securities amounted to 64.8% of Croatia’s general government debt stock in 2016, while loans were the remaining 35.2%.

Greece had the highest debt-to-GDP ratio among EU members at the end of first quarter with 176.2% while Estonia had the lowest ratio of 9.2%. The EU average stood at 84.1% while Croatia’s regional peers Bulgaria had a debt-to-GDP ratio of 28.6% and Romania's was 37.1% at the end of March. Slovenia’s debt-to-GDP ratio stood at 81.4% at end-Q1.

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

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

Fitch Ratings forecasts Croatia’s public debt to fall to 82.5% of GDP at end-2017, well above the 'BB' median of 49.5%, the rating agency said on July 14 when it affirmed Croatia's long-term foreign and local currency Issuer Default Ratings (IDR) at 'BB' with a stable outlook.

Materialisation of contingent liabilities, including from arrears in the healthcare sector or adverse litigations, poses a risk, as do exchange rate fluctuations, given that 76.5% of public debt was foreign-currency denominated at end-2016, Fitch also said. Refinancing needs are high, exceeding 15% of GDP in 2017, according to Fitch.

Investors living outside 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 Eurostat showed on June 20. Only 6.5% of Croatia’s general government debt stock had a maturity of less than one year in 2016.