Thursday, 1 December 2022

Euro in Croatia: Upgrades on ATMs for an Easier Transition

December 1, 2022 - Tihomir Mavricek, executive director of the Cash Sector of the CNB, spoke about the introduction of the euro in Croatia for the N1 television. One month before the introduction of the euro as an official means of payment in the Republic of Croatia, citizens were able to purchase initial packages of euro coins.

Poslovni reports. "The initial package of euro coins contains 33 coins, three coins of 2 and 1 euro, 5 of 20, 50 and 10 cents, 3 of 5 cents, 4 of 2 cents, and 5 of 1 cent. The total value is 13.28 euros, and our citizens will be able to get it for exactly one hundred kunas in all branches of banks, post offices, and Fina", said Mavricek.

"They must not be used for payment until January 1, 2023," he emphasized for N1.

He also clarified why these euro coins are not allowed to be used by citizens and why they would not be valid in, for example, Slovenia. With the first of January, the euro becomes a means of payment.

"Until then, citizens could have problems if they pay with these coins, and they could also receive a fine because it is not a legal means of payment until then," said Mavricek.

He states that this is one of the last steps to prepare for introducing the euro in Croatia. He also referred to euro banknotes. "All the necessary quantities of euro banknotes are in our vaults; they are already being distributed to the banks."

He added that ATMs would be adjusted in December to dispense euros from January. "From January 15, the entire network of ATMs will dispense euros."

Mavricek mentioned another critical change that will facilitate the transition to the euro. "The CNB has agreed with the banks that from December 15, the fee for withdrawing banknotes from ATMs of other banks will be abolished, for kuna until the end of December, and for euros from January 1 to 15."

What will happen to kuna coins after the changeover to the euro?

"From the first of October, when we urged our citizens to deposit extra kuna in banks, coins started to arrive, and they will be taken care of safely. This means that in three years, they will be sold as secondary raw materials when they cease to be a means of payment. It is a huge logistical task, and it takes time," Mavricek said, adding that kuna coins can also be recycled into euros.

"We will process and cut the banknotes on the banknote processing systems, and then the rest will be taken care of," he concluded.

For more, make sure to check out our dedicated Lifestyle section.

Saturday, 16 July 2022

Moody's Raises Croatia's Credit Rating to Investment Grade

ZAGREB, 16 July 2022 - Moody's on Friday raised Croatia's credit rating by two levels to an investment grade and assessed that Croatian economy's outlook is stable following to the formal completion of the decision-making for Croatia's entry into the euro area.

On 12 July, the Economic and Financial Council of the European Union (Ecofin) gave the final approval for Croatia's admission to the euro zone on 1 January 2023 when the country is switching to the euro.

According to a press release issued by this international credit rating agency, "Moody's Investors Service ("Moody's") has today upgraded the Government of Croatia's foreign- and domestic-currency long-term issuer ratings and foreign-currency senior unsecured debt ratings to Baa2 from Ba1."

"The outlook has been changed to stable from ratings under review. This concludes the review for upgrade that was initiated on 24 June 2022."

"The upgrade of the ratings to Baa2 is driven by the adoption of the legal acts formalizing Croatia's adoption of the euro by the EU Economic and Financial Affairs Council (ECOFIN) on 12 July 2022. Croatia will adopt the euro as its domestic currency on 1 January 2023, thereby eliminating any foreign currency risk for the government's largely euro-denominated debt burden and reducing government liquidity risk.

Moody's also sees euro adoption as credit positive for Croatia's economic strength as it will remove foreign currency risk and transaction costs also for the private sector, spurring further economic integration of Croatia with the euro area.

Ability of Croatia's institutions to complete rigorous process towards euro adoption on time

Furthermore, the ability of the country's institutions to complete the rigorous process towards euro adoption within the planned time frame also supports Moody's assessment of the strength of Croatia's institutions and governance.

Stable outlook balances continued strength of Croatia's economic and fiscal recovery

"The stable outlook balances the continued strength of Croatia's economic and fiscal recovery from the initial shock of the coronavirus pandemic against risks to the macroeconomic and geopolitical environment in Europe stemming from rapidly rising inflation, concerns around the stability of the EU's energy supply and the Russian invasion of Ukraine (Caa3 negative)," reads the press release.

The long-term country ceilings of Croatia for local and foreign currency bonds have been raised to Aa2 from A2. This reflects the fact that for euro area countries, as Croatia will be from 1 January 2023 on, a six-notch gap between the local currency ceiling and the local currency rating, as well as a zero-notch gap between the local currency ceiling and foreign currency ceiling, is typical, reflecting benefits from the euro area's strong common institutional, legal and regulatory framework, as well as liquidity support and other crisis management mechanisms. It also is in line with our view of de minimis exit risk from the euro area.

Rationale for upgrading Croatia's ratings

"Most notably, the adoption of the euro reduces Croatia's share of government debt denominated in foreign currency from over 70% at present to close to zero, as this debt is almost wholly denominated in euros. This, in turn, has a significant positive impact on Moody's assessment of the government's fiscal strength as it eliminates the risk of a sudden and potentially significant increase in the local currency value of government debt relative to GDP in the event of a devaluation of the local currency relative to the euro," reads the press release.

Fiscal strength is one of the four factors of Moody's assessment of a sovereign's creditworthiness.

"Croatia's economy is already highly integrated with that of the euro area, and the country has maintained a managed float of its domestic currency in a narrow band against the euro since 1999. Nevertheless, we expect that euro adoption will have additional positive effects on Croatia's economic strength over the medium to long term by reducing transaction costs and eliminating any remaining foreign currency risks for transactions between Croatia and the euro area, which already accounts for more than half of all of Croatia's imports and exports. This is likely to spur further economic integration and foreign direct investment into Croatia, supporting its longer term growth potential.

"Furthermore, Croatia's adoption of the euro will also reduce foreign currency risks for the banking sector, and will also have a positive impact on our assessment of government liquidity and external vulnerability risks. As a euro area member, Croatia would in a future crisis stand to benefit from potential European Central Bank (ECB) support programmes such as the asset purchase programmes that were first introduced in 2015, while membership of the European Stability Mechanism (ESM, Aaa stable) will also support the government's ability to fund itself in a crisis situation.

Lastly, the ability of the Croatian institutions to steer the country into the euro only two years after joining ERM II - the antechamber of the currency bloc - supports our assessment of the effectiveness and strength of the country's institutions and governance.

Agency expects Croatia's GDP growth to remain robust at 3% in 2022

The stable outlook balances the continued strength of Croatia's economic and fiscal recovery from the initial shock of the coronavirus pandemic against risks to the macroeconomic and geopolitical environment in Europe over the coming 12 to 18 months as well as country-specific challenges that include the effective absorption of EU funds and adverse demographic trends.

The Croatian economy has continued to recover strongly from the sharply negative impact of the coronavirus pandemic on the country's tourism sector and overall economy in 2020.

In its baseline scenario, the agency expects Croatia's GDP growth to remain robust at 3% in 2022 while the debt burden will continue to decline at a more moderate pace, although the continued strength of the tourism sector's rebound from the pandemic could produce outcomes that are stronger than our baseline forecast this year.

However, there are prominent risks to the economic and fiscal outlook for Croatia stemming from a deteriorating macroeconomic environment in Europe. Such risks tied to rapidly rising inflation and concerns about the stability of the energy supply of several EU member states are in large part also linked to geopolitical risks and heightened uncertainty stemming from Russia's invasion of Ukraine and the on-going military conflict. Although the direct risks of a potential energy supply shock are limited for Croatia, in an adverse scenario, the euro area could enter a recession over the next 12 to 18 months, which would also have material negative implications for the economic and fiscal outlook for Croatia.

Moreover, Croatia's relatively weak track record of absorbing EU investment funds raises question marks around whether the country's economy will be able to derive the full benefits of the very substantial funding available for Croatia under NGEU and the EU's regular budget for 2021-2027. Croatia's medium to long term growth potential also continues to face significant challenges from the projected decline of the country's working age population.

Upward pressure could build on the ratings if Croatia manages to maintain a strong economic performance and growth potential as well as a continued reduction of the government debt burden over the coming years. This would notably be supported by evidence of effective implementation of the investments and reforms tied to the EU's post-pandemic recovery fund Next Generation EU, which would support economic growth in the near term but also growth potential over the longer term.

Possible negative pressure tied to resurgence of pandemic-related complications or to fallout of Russia's invasion

Negative pressure could build on the ratings in the event of a sharp deterioration of Croatia's growth potential relative to Moody's expectations, most likely tied either to a resurgence of pandemic-related complications for the tourism industry or to the economic and political spillover effects from the Russian invasion of Ukraine. A failure to effectively implement the investments and reforms of Next Generation EU would also weigh negatively on Moody's assessment of Croatia's growth potential and the strength of its institutions and governance, says the agency.

All three major agencies raise Croatia's credit rating to highest level in history

The Fitch agency raised Croatia's credit rating to BBB+ on Wednesday, and on Thursday, Standard & Poor's upgraded its credit rating by two levels - from BBB- to BBB+, with a stable outlook.

Until the first half of 2019, Croatia had a non-investment rating from both Fitch and S&P, and now the country is at the third level of the investment rating, its highest level in history.

A regular review of the rating by S&P was scheduled for September, but due to the importance of the confirmation of Croatia's entry into the euro area S&P decided to raise the rating earlier.

Thursday, 19 May 2022

HUB Director: We Don't Expect Extremely High Increase In Interest Rates

ZAGREB, 19 May 2022 - Croatian Banking Association (HUB) director Zdenko Adrović said on Thursday that interest rates were not expected to rise extremely high but at rates that most people would be able to bear.

Responding to questions from the press at a HUB conference on the impact of euro adoption on the Croatian financial sector, Adrović said he did not know at what pace interest rates would grow, citing discussions in the Council of Governors at the European Central Bank.

"Some are calling for a quick and sharp increase in interest rates of 0.5 per cent already in July so that there would no longer be negative rates, while others are advocating a slower and milder increase. We will have to wait for the middle of the year," Adrović said.

He said that interest rates would most likely go up, adding that statistically 39 per cent of all loans were agreed at a floating interest rate and 61 per cent at a fixed interest rate. "This means that nothing will happen to those with the fixed interest rate, while in the case of those with the floating interest rate, the changeable part of the interest rate will change, while the margin will remain fixed."

 "We don't expect an extremely high increase, but one that most people can bear. We advise citizens to check their annuities and talk to their bank about the possibility of fixing the interest rate for a future period of three or five years if they want to avoid this risk," Adrović said.


For more, check out our business section

Saturday, 19 March 2022

Finance Minister Says S&P Report Very Positive

ZAGREB, 19 March 2022 - Finance Minister Zdravko on Saturday welcomed the affirmation of Croatia's credit rating by the Standard & Poor's credit rating agency.

"In the present circumstances, this is very good news. The report is very positively worded," Marić told a press conference.

Standard & Poor's on Friday affirmed Croatia's credit rating at 'BBB-/A-3' with a stable outlook, noting that the conflict in Ukraine might affect Croatia through weaker global demand, reduced tourism and inflation.

The agency expects the Croatian economy to grow at a stable pace in the next two years despite unfavourable inflation trends and the macroeconomic consequences of the war in Ukraine. The government is expected to remain committed to its reform programme, successfully absorb significant EU financing, and gradually rebuild the fiscal space it lost in the aftermath of the COVID-19 pandemic.

According to S&P, the Croatian economy is likely to expand at a rate of 3.7% in 2023 and 3.4% in 2024 and 2025. However, the growth forecast for this year has been revised down from 5.0% to 2.5% because of global geopolitical uncertainties following Russia's military intervention in Ukraine and rising energy and commodity prices.

Marić said that over the next month the government would update the official macroeconomic projections for 2022, including projections for growth and inflation. S&P projected the inflation rate for this year at around 6%.

The growth forecast downgrade is also the consequence of last year's growth, which was above all expectations, and uncertainties related to the direct and indirect effects of the Russian invasion of Ukraine, the finance minister said.

As for inflation, he said that it was expected to continue picking up in the first half of the year, while its movement in the second half would depend on geopolitical developments and energy and food price trends.

Eurozone entry is a positive risk

Marić said he was particularly glad that S&P had recognised the government's efforts to improve the absorption of EU funding as well as its efforts regarding the EU's Multiannual Financial Framework and the National Recovery and Resilience Plan.

He said that the implementation of the National Recovery and Resilience Plan was going very well, adding that everything envisaged under the plan had been fulfilled and that a new tranche of €700 million was expected in June.

S&P said that despite the complex inflationary context Croatia is on track for entry into the eurozone by 2023 and that the government, in line with euro adoption provisions, will reduce its fiscal deficit below the Maastricht reference level of 3% of GDP in 2023-2025.

Marić said that eurozone entry was a positive risk and would help increase the country's credit rating. He said it was very important for the government to maintain its good standing and trust in international financial circles, even as regards the preparation of an international bond issue, adding that the S&P report also contributed to the government's reputation.

Marić revealed that he had presented to S&P the government's package of measures to mitigate the impact of inflationary pressures, worth nearly HRK 5 billion, including a VAT reduction from 13% to 5.0% for a wide range of food products, such as fresh meat, fish, fruit and vegetables.

Asked by the press if he expected further increases in retail prices, he said this was hard to predict, expressing hope that the VAT cut would alleviate further price increases. He noted that retail chains had begun lowering prices even before 1 April, when the government package goes into force, adding that this was good and that it indicated high competition in the retail sector.

Marić said he had met with executives from the 10 leading retail chains in the country. "They expressed their readiness to be as receptive as possible, but noted that they were not the only link in the chain, because there are suppliers as well."

Commenting on media reports that people were increasingly buying certain items, such as cooking oil, Marić said that despite all concerns there was no need to stock up on food.

He said that the government was also working on measures concerning the inflow of Ukrainian refugees. They will be given both institutional and financial support, which will have certain repercussions for fiscal policy, he added.

According to the latest data, over 7,500 Ukrainians displaced by the war in their country have found refuge in Croatia.  

Marić denies co-owner of Jadranka hotel group booked accommodation for him

Responding to questions from the press, Marić denied an article on the news website that Krešimir Filipović, co-owner of the Jadranka Group, had book him accommodation for four days at the Bellevue Hotel, owned by Jadranka, in 2019.

"That was the first time I met Mr Filipović. I had not had any direct or indirect contact with him before that, nor are we in regular contact today," Marić said.

He said that all the loans to this company from the Croatian Bank for Reconstruction and Development had been approved long before his term in office, adding that the company was duly meeting all its obligations in that regard. wrote about Jadranka following a complaint by Arsen Mujagić, a civil society activist from Mali Lošinj on the northern Adriatic island of Lošinj, according to which one of Jadranka's owners is a fund owned by Russian citizens who have been placed under EU sanctions. 

Marić said that the Register of Beneficial Owners is public, and that everyone who condemns the Russian aggression on Ukraine agrees that the enforcement of sanctions is inevitable.

Earlier in the day, the Finance Ministry said it was not true that there had been a change of ownership in Jadranka after the article on

On 18 August 2020, Predrag Perenčević and Krešimir Filipović were entered in the Register of Beneficial Owners as the beneficial owners of Jadranka d.d. and there have been no changes since, the Finance Ministry said in response to

The Ministry said that Marić had not stayed in a luxury or presidential suite, stressing that the minister had booked the accommodation himself and paid for it.

Responding to the question about its ownership and whether Russians still had stakes in the company, Jadranka said recently that there had been a change of ownership in 2014, when the Zagreb-based Beta Ulaganja company became a full owner of Jadranka Group.

"Croatian citizens Predrag Perenčević and Krešimir Filipović have continually been the ultimate owners of Jadranka Group. Their financial assets and investments are managed by the Investment and Asset Management Company through Beta Ulaganja d.o.o., as entered in the Court Register and the Register of Beneficial Owners," Jadranka said then.

Tuesday, 22 February 2022

Finance Ministry Issues HRK 800M in Treasury Bills

ZAGREB, 22 Feb 2022 - Croatia's finance ministry on Tuesday issued HRK 800 million in treasury bills which mature in one year at the low interest rate is 0.01 per cent.

In advance of the maturity of treasury bills worth a billion kuna, the Ministry offered HRK 700 million for subscription. Financial institutions submitted bids totalling HRK 803 million and the Ministry accepted them all.

The balance of subscribed kuna treasury bills has now decreased by HRK 197 million to HRK 13.6 billion.

The next auction of treasury bills will be held on 1 March, said the ministry.

(€1 = HRK 7.532838)

Tuesday, 8 February 2022

ZSE Crobex Rises For Three Days In Row

ZAGREB, 8 Feb 2022 - The Zagreb Stock Exchange (ZSE) Crobex index rose by 0.44% to 2,141 points on Tuesday, thus being on the rise for three straight working days, and the specialised Crobex10 rebounded by 0.3% to 1,305 points after a mild dip on Monday. Broken down by sectors, the industrial index increased 2.75%, and the only one to weaken today was Crobexturist, which fell by 0.61%. The ZSE saw a turnover of 6.2 million kuna on Tuesday, 3.2 million more than the day before. The only stock that crossed the million kuna mark in trading was the Atlantska Plovidba shipping company, HRK 2.33 million. The price of its shares jumped by 2.96% to HRK 418. Forty-five stocks traded today, with 25 increasing and 10 decreasing in price, while another 10 were stable. (€1 = HRK 7.526770)
Tuesday, 8 February 2022

Finance Ministry Issues HRK 1.76 bn in Treasury Bills

ZAGREB, 8 Feb 2022 - The Croatian Ministry of Finance sold HRK 1.76 billion worth of treasury bills at an auction on Tuesday.

The bills mature in one year and the interest rate is 0.01 per cent, the same as at the previous auction in January.

In advance of the maturity of treasury bills worth HRK 1.86 billion, the Ministry offered HRK 1.6 billion worth of treasury bills for subscription. Financial institutions submitted bids totalling HRK 1.76 billion and the Ministry accepted them all.

The low interest rate of 0.01 per cent is the result of a large surplus of liquidity in the domestic financial system, exceeding HRK 70 billion.

The balance of subscribed kuna treasury bills has now decreased by HRK 94 million to HRK 13.6 billion.

The next auction is set for 15 February.

(€1 = HRK 7.526770)

Tuesday, 1 February 2022

Croatia Issues €1 bn Bond on Domestic Market

ZAGREB, 1 Feb 2022 - Croatia has successfully issued a €1 billion bond on the domestic market with which it will reschedule two securities from 2017 and 2019, Finance Minister Zdravko Marić told Hina on Tuesday.

The new bond is due in 2030 with a yield of 1.39% and coupon interest of 1.25%.

The issue was arranged by Erste & Steiermärkische Bank, OTP banka, Privredna banka Zagreb, Raiffeisenbank Austria, and Zagrebačka banka.

The new bond will reschedule a bond due on 5 February in the amount of €500 million, issued in 2019 with 0.5% coupon interest, and a bond due due on 7 February in the amount of HRK 3 billion, issued in 2017 with 2.25% coupon interest.

Marić said interest in the new bond surpassed the target issue amount by 40%, totalling €1.4 billion. Among the investors were pension funds, banks, insurance and investment companies.

"The new issues testifies to Croatia's good position on the capital market, which is in line with previous issues, and the success of the new issue also reflects Croatia's upward trajectory among the rating agencies. In two of the three most important agencies we are at the investment grade level, where we belong," Marić said.

The next steps towards introducing the euro will additionally improve Croatia's status, notably regarding the additional decrease of the risk premium, which is especially important in the context of the current pressures on the growth of reference interest rates, geopolitical developments and energy prices, Marić said.

The new issue reflects Croatia's good reputation on the domestic capital market as well as the strength and liquidity of the domestic financial industry, he added.

A €1.25 billion bond issued in 2014 is due in May and a €1 billion bond issued in 2011 in July.

(€1 = HRK 7.529067)

Tuesday, 1 February 2022

ZSE Crobex Up For 3 Straight Days, HT With Largest Share Buyback Transaction

ZAGREB, 1 Feb 2022 - The Zagreb Stock Exchange Crobex index rose 0.60% to 2,145.45 points and the specialised Crobex10 grew 0.37% to 1,306.33 points on Tuesday. 

Today's turnover totalled HRK 7.5 million, or 3.6 million more than on Monday.

ZSE block trading marked by HT share buyback transaction

Today the Croatian Telecom (HT) stated that it "has executed the largest share buyback transaction in its history," which amounted to 81.6 million kuna, or HRK 183 per share.

"Our share buyback strategy clearly demonstrates our strong focus on value creation to our shareholders," the HT says, adding that now it "holds in total 866,830 treasury shares, representing 1.082894% of the Company’s issued share capital. Share capital amounts to HRK 10,244,977,390.25, and is divided into 80,047,509 shares without nominal value."

Forty-four stocks traded today, with 15 gaining and 13 losing in price, while 16 were stable.

(€1 = HRK 7.529067)

Monday, 31 January 2022

Minister Announces New Call for Applications for Subsidised Housing Loans

ZAGREB, 31 January, 2022 - Construction Minister Darko Horvat on Monday announced a new round of applications for subsidised housing loans, noting that this year HRK 50 million would be spent for that purpose and that a public call for banks to submit their offers would be published in mid-February while loan requests would be submitted as of 21 March.

A call for citizens to apply for subsidised housing loans could be published in mid-March, Horvat said.

Since the relevant legislation is aimed at encouraging demographic revival, urban regeneration and reducing the number of young families emigrating from the country, the call will be open until the subsidies are spent, Horvat said in a post on his ministry's website.

The ministry plans to invite, on 16 February, a call for interested credit institutions to submit their offers regarding interest rates, as the first step towards publishing a new call for applications by citizens.

The ministry expects to publish a call for applications for subsidised housing loans on 9 March, when citizens will be able to start submitting their loan applications to banks.

On 21 March, banks are expected to submit, on behalf of their clients, requests for subsidies to Croatia Real Estate Agency (APN).

The ministry recalls that 22,169 requests for subsidised housing loans were granted between 2017, when the scheme was introduced, and March 2021.

In the families that use housing loan subsidies, more than 4,600 children have been born since 2017 and 13,130 children under 18 have been reported in the loan requests.

More than HRK 456.7 million has been invested in state-subsidised housing loans so far.

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