ZAGREB, Nov 3 (Hina) - With a foreign debt accounting for less than 60% of its Gross Domestic Product (GDP), Croatia is a moderately indebted country, however, the current debt growth rate will not be sustainable in the long run and
its dynamics will have to be more adjusted to GDP's movements and exports of goods and services.
ZAGREB, Nov 3 (Hina) - With a foreign debt accounting for less than
60% of its Gross Domestic Product (GDP), Croatia is a moderately
indebted country, however, the current debt growth rate will not be
sustainable in the long run and its dynamics will have to be more
adjusted to GDP's movements and exports of goods and services. #L#
This estimate is based on data on the development of Croatia's
foreign debt, collected by the Croatian National Bank (HNB). In
late July this year the debt totalled USD13.3 billion.
Compared to its debt at the end of 2001, the country's total debt
(incurred by the state, banks, companies and other sectors) has
increased by USD2.1 billion or 18.6 percent, with negative inter-
currency changes accounting for around USD900 million, reads the
HNB's October bulletin.
With a debt accounting for less than 60% of its GDP, Croatia can
still be considered a moderately indebted country, according to its
projected GDP in 2002 and on condition the amount of the foreign
debt does not undergo significant changes until the end of this
year. For example, a similar debt-GDP ratio in 2001 was registered
by Hungary (around 60%) and Slovakia (around 56%), while the
foreign debt of Slovenia, the Czech Republic and Poland did not
exceed 40% of GDP.
However, for the foreign debt to be sustainable in the long run, its
growth rate must be lower than the growth of GDP and exports. This is
why the current GDP growth rate is not sustainable in the long run
and why its dynamics should be adjusted more to the dynamics of
growth of GDP and exports, HNB experts warn.
In the first seven months of this year Croatia paid USD1.4 billion
of the capital amount of the foreign debt and USD300 million of
interest, and at the same time sought a new loan of USD2.5 billion.
The net foreign debt thus increased by USD1.2 billion. Depreciation
of the US dollar in relation to the euro and other currencies in
which the country's debt is expressed has caused a nominal increase
of the foreign debt in the first seven months of USD914 million.
The state accounts for 43.1 percent or 5,723 million dollars of the
total debt, its share having increased over the past several years.
Companies accounted for 27 percent of the debt or USD3,580 million,
banks for USD2,537 million (19.1%), while direct investments
accounted for 10 percent of the foreign debt or USD1,331 million.
According to the HNB, between August and December this year Croatia
will have to pay USD635 million of the principal sum of its foreign
debt and another USD165 million of interest. Together with the
already paid amount in the first seven months of this year, this
makes two billion USD of the principal sum, of which the state
accounts for around USD600 million.
Projections for the next four years show that the annual payments of
the principal sum will be decreasing in relation to this year.
In the first quarter of this year the state issued 500 million euros
worth of government bonds on the European market and in the second
quarter another 207 million dollars worth of so-called samurai
bonds on the Japanese market.
Noting that the ability to service the debt is connected to other
macroeconomic indicators, HNB analysts consider encouraging the
growth of GDP in the past two years, as well as an increase in
investments and the reduction of public spending. However, the
export of goods has been stagnating, with per capita export
totalling a mere USD1,000, which is far less than in other
comparable countries in transition.
(hina) rml