2019年-IMF国际货币组织全球_Republic_of_Croatia_Selected_Issues_18页_2mb

Croatia: Assessing Progress in Reducing Financial Imbalances

Core Content

This document, prepared by the IMF staff team for Croatia's periodic consultation, evaluates the progress made in reducing financial imbalances in the country over the period 2001–2017, with a focus on the aftermath of the Global Financial Crisis (GFC). It highlights the vulnerabilities across different economic sectors and provides recommendations to further reduce these risks.

Main Points

• High Total Indebtedness: Almost a decade after the GFC, Croatia's total indebtedness remains high, with public debt above 70% of GDP and corporate debt concentrated in certain segments. The economy's net financial position (NFP) improved from nearly -100% of GDP in 2014 to -61.9% in 2017.
• Sectoral Financial Positions:
  • Banks: The banking sector's balance sheet expanded to nearly 100% of GDP, with a small positive NFP in 2017. FX loans remain a significant portion of bank lending, with FX lending share declining from 73% post-crisis to 56% by end-2018. The sector's net FX position improved from -34.3% of GDP in 2010 to below -11.6% in 2017.
  • Non-Financial Corporations (NFPs): NFPs faced a drastic decline in NFP post-GFC, reaching -130% of GDP in 2010. Despite some improvement, the NFP remained at -106% of GDP in 2017. NPLs peaked at 35% of total loans post-crisis and started to decline in 2015. The debt overhang remains a concern, with debt exceeding sustainable levels by about a third.
  • Households: Households' NFP is strong, close to 90% of GDP in 2017. A high share of household debt is in FX and at variable rates, with about 48.6% of loans in FX as of April 2018. The sector's reliance on FX deposits and loans remains significant.
  • Public Sector: The government's NFP deteriorated significantly post-GFC, reaching -35% of GDP in 2017. Public debt increased to over 85% of GDP by 2015, but fiscal consolidation led to a surplus of 0.9% of GDP in 2017. The share of external debt in public debt declined from 64% in 2000 to 36% in 2017.
  • Central Bank (CNB): The CNB's balance sheet has grown considerably post-crisis, with assets exceeding 35% of GDP in 2017. Its NFP has remained slightly negative, and it maintains a significant buffer of reserves, which exceeded 100% of short-term debt in 2017.

Key Risks and Vulnerabilities

• Currency Risk: High euroization and FX exposure remain significant risks. Over 85% of loans to borrowers with mismatched currency positions are not hedged, increasing vulnerability to exchange rate volatility.
• Debt Maturity Mismatch: The risk of currency-induced credit risk (CICR) is elevated due to the mismatch between FX loans and domestic deposits. This risk is amplified by the fact that FX lending is supported by shorter maturity deposits.
• Debt Overhang: Corporate sector debt overhang remains a concern, with about a third of corporate debt exceeding sustainable levels. This has a negative impact on corporate investment and economic growth.
• FX Stress Test: Under a 20% kuna depreciation scenario, the external debt of the corporate sector would worsen by 11 percentage points, reaching -106% of GDP. The CNB and banks also face significant FX exposure, with the CNB's FX liabilities increasing by 39% post-shock.

Recommendations

• Fiscal Consolidation: Continue fiscal consolidation as advised in the 2018 Article IV Country Report to reduce public sector vulnerabilities.
• Reserve Accumulation: Maintain an adequate level of reserves to buffer against currency risks. Diversify the sources of reserve accumulation by increasing merchandise exports and attracting foreign direct investment (FDI).
• Structural Reforms: Implement structural reforms to improve the business environment and labor force participation, which could enhance FDI inflows and economic resilience.
• Risk Monitoring and Education: Continue close monitoring and education on currency and interest rate risks. Banks should enhance internal risk management practices, and the CNB should promote awareness through publications and directives.

Conclusion

Croatia has made progress in reducing financial imbalances since the GFC, but significant vulnerabilities remain, particularly in the corporate and household sectors. Continued fiscal discipline, structural reforms, and risk management efforts are essential to further stabilize the economy and reduce exposure to financial shocks.