une 26 (Bloomberg) -- Croatia
faces “no significant risks” in repaying debt maturing this year even though several neighboring countries were forced to seek international aid to avert defaults, central bank Deputy Governor
Boris Vujcic said. The external
debt is at 83 percent of gross domestic product. The government raised 750 million euros ($1.05 billion) in a bond sale on May 27 and the
central bank also freed some liquidity in the banking system to help finance that, Vujcic said in an interview during a conference in Dubrovnik yesterday.
Countries across eastern Europe, including Croatia’s neighbors Hungary and Serbia, have turned to the
International Monetary Fund for aid as the global financial crisis shut off capital flows.
Timothy Ash, a strategist at Royal Bank of Scotland Group Plc,
expects the country to seek a bailout loan “very soon,” he wrote in a note to clients on June 23.
“Until the end of this year, in principle we don’t see any significant risks in repaying maturing debt,” Vujcic said. “The concerns were much greater at the end of last year. This year we expect a slight increase in external debt versus
GDP, because GDP is going to decline.”
External debt has risen “somewhat” from 39.9 billion euros ($56 billion) in January and is now stagnating as inflows to the banking system have almost frozen, Vujcic said.
Croatia, one of the last east European nations to report first-quarter economic performance, may say on June 29 that its GDP dropped “significantly” in the period, Vujcic said.
‘Significant Drop’
Most east European economies are shrinking because the global financial crisis curbed export demand. Croatia’s GDP may have dropped 5.8 percent in the first quarter, the
World Bank said last month. Neighboring Slovenia slumped 8.5 percent. The data will be released on June 29.
“We will see a significant drop in GDP as we have already said, but not as much as in Slovenia,” Vujcic said. “We definitely don’t expect it to be as dramatic as in Slovenia.”
The contraction in Slovenia was the fourth biggest in the European Union after the Baltic states of Lithuania, Latvia and Estonia.
Croatia’s economy may shrink as much as 4 percent this year, central bank Governor
Zeljko Rohatinski said in April.
Croatian national output grew an annual 0.2 percent in the last quarter of 2008 and 2.4 percent for all of last year. Industrial
output declined in May for an eighth consecutive month, falling an annual 7.3 percent.
Even with the economy set to contract this year, Croatia will refrain from asking for international aid to cope with the crisis, Rohatinski said in an interview in April.
The central bank manages the country’s currency, the kuna, in a tight band to the euro. Policy makers affect the exchange rate by injecting or removing currency from the market through weekly repurchase auctions, rather than via
interest rates. The benchmark has been at 9 percent since the end of 2007.
