Croatia’s and Slovenia’s Q2 Budget Deficits Above EU Average

Croatian government budget deficit to GDP ratio in 2Q 2020 has amounted to 11.7% of GDP. Slovenia has achieved even higher budget deficit of 16.1% of GDP. Both were above EU budget deficit which stood at 11% of GDP marked by COVID-19 containment measures in all member states.

Croatian government deficit in 2Q 2020 stood at 11.7% GDP. This is in line with strong increase of spending for pandemic economy support measures for which the State has spent app. HRK 10bn by now. It is also due to complete absence of tourism revenues as pandemic measures were in full force and travel restriction measures were in place. On the annual level we expect public budget deficit to be around 9% since solid tourist activity was realized in July and in part of August so still a considerable amount of summer tourism revenues should have been realized. As a result of these events public debt in second quarter increased strongly by 9.4 p.p. YoY to 85.3% GDP. State spending for pandemic measures will continue while further spikes in infections rates are threating recuperation of consumer spending. We expect to see a drop in tourism activity in the last quarter of the year, so we see the public debt to remain firmly on a increasing path, and we see it growing further by the end of 2020 to 90% of GDP.

Croatia Public Debt & Public Deficit (% GDP)

Slovenia has in Q2 achieved even higher budget deficit amounting to 16.1% GDP, a decrease of 16.8 p.p YoY as last year in Q2 government budget was in surplus of 0.7% to GDP. Public debt has increased by 10.5 p.p. to 78.2% of GDP driven by strong state spending for pandemic measures and increase in nominal amount of debt for EUR 5 bn to EUR 36.8 bn. Public debt is expected to increase further and to reach 81.1% GDP by the end of 2020 while we expect downward debt trajectory to be stopped this year. But as new restrictions in the economy are again introduced from October, we expect to see more fiscal packages so deficit of budget balance will be posted next year as well.

Slovenia Public Debt & Public Deficit (% GDP)