Monday, 21 March 2022

Minister Zdravko Maric Satisfied with S&P's Credit Rating for Croatia

March the 21st, 2022 - Croatian Finance Minister Zdravko Maric has expressed his satisfaction with Croatia's credit rating, as confirmed by the S&P rating agency recently, claiming that Croatia now looks good in the eyes of international financial circles.

As Gordana Grgas/Novac/Jutarnji writes, after the respected Standard & Poor's rating agency reaffirmed the Republic of Croatia's credit rating and its stable outlook on Friday, but also lowered its forecast for economic growth this year from 5 to 2.5 percent, and gave a higher estimate for inflation than the previous one, of about 6 percent, Minister Zdravko Maric appeared to be satisfied in his statement for the media.

He believes that Croatia has a good reputation and is looking better and better in the eyes of various international financial circles, and this is important because it is preparing an international bond issue, with the help of the latest S&P report. As the circumstances on the international markets aren't the most favourable at this moment in time, he said, the realisation will be timed "when the best moment comes".

S&P raised Croatia's investment rating (BBB- / A-3) back in March 2019 and hasn't changed it since. Its possible increase, they mentioned, could be influenced by joining the Eurozone, a major political move which is set to occur next year.

According to Minisrer Zdravko Maric, the government will publish its latest official macroeconomic projections for this year in April, and he said that inflation has become one of the most important and noticeable macroeconomic indicators of our times.

"Inflation stood at 5.7 percent in January and at 6.3 percent in February. We expect this trend of accelerating inflation to continue in the first half of the year due to the base effect, and then a lot will depend on all of the other factors influencing this inflation. First of all, these are the prices of energy and food, but also the circumstances related to geopolitical and geostrategic events," said Maric, noting that these same circumstances affect the current forecast of Croatian GDP growth.

He said he was very pleased that the S&P report "recognised the government's efforts to improve the absorption of European Union (EU) funds, both from the Multiannual Financial Framework and the EU's New Generation,'' as well as to mitigate negative demographic trends through various measures and tax policies.

Regarding the implementation of the NPOO, he assessed that it is going very well and that Croatia had fulfilled everything it needed to by the end of last year, and then sent a report for evaluation to Brussels and expects an additional tranche of 700 million euros to be paid out in June.

For more, check out our politics 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.

Wednesday, 6 October 2021

Hrvatska Elektroprivreda (HEP) Regains Investment Grade Status

ZAGREB, 6 Oct, 2021 - Standard&Poor’s (S&P) ratings agency has upgraded the credit rating of Croatia's state-owned energy producer Hrvatska Elektroprivreda (HEP) from BB+ to BBB-, so that now it is the same as the sovereign credit rating.

It is the first time since 2009 that HEP's credit rating has been restored to investment grade, the company said in a statement on Wednesday.

S&P said in its report that the upgrade reflects HEP’s success regarding robust credit metrics in volatile hydrological conditions and commodity prices.

This is a result of HEP’s gradual evolution towards a market-oriented company with a more flexible cost structure. In comparison to what was previously captured in the rating, HEP shows it is able to more effectively and more robustly manage its exposure to commodity prices and lower implicit volatility. A very good track record proves the company is committed to maintaining financial strength, the report says.

S&P "has recognised our continued efforts to improve risk management and our overall financial position in the challenging circumstances of the coronavirus pandemic," the chairman of HEP's management board, Frane Barbarić, said.

He recalled that, thanks to the good business results in 2020, HEP paid a portion of its profit, notably HRK 840.6 million, into the state budget in September. The company has continued to operate successfully, generating a consolidated net profit of HRK 1.25 billion in the first half of 2021, which is 291 million more than in the first half of 2020.

For more about business in Croatia, follow TCN's dedicated page.

Tuesday, 23 March 2021

Standard & Poor's: Tourism Vulnerable Point and Factor for Croatia's Economic Recovery

ZAGREB, 23 March, 2021 - Croatia's economic recovery from the pandemic recession hinges on the tourism sector's recovery, the Standard & Poor's agency said, assessing that recovery and protective mechanisms will offset the risks caused by the pandemic.

Croatia's economic recovery from the pandemic-induced recession is within reach as long as tourism picks up, S%P's said in its outlook released on Tuesday.

It recalled that Croatia's credit rating is 'BBB-/A-3', with a stable outlook.

Impact of COVID-19 pandemic blow to tourism

Croatia's economy is expected to expand by 5.1% this year, S&P's said in its latest outlook contracting Croatia's estimated GDP growth by half a percentage point.

In 2020, the country's GDP fell by 8.4% according to S&P's forecast, however this is 0.4% percentage points less than it had forecast in its autumn outlook in September.

In 2022 the economy is expected to grow by 3.5%, and by 2.6% in 2023 and 2024.

S&P considers that mass vaccination against COVID-19 is a precondition for economic growth which will relieve travel restrictions hence boosting tourism.

Tourism in fact has been affected the most by the pandemic, causing GDP to contract by more than 8% in 2020.

"This highlighted vulnerabilities due to Croatia being one of the most-tourism dependent sovereigns in Europe," S&P's said, adding that "despite prospects of a dynamic summer season, we assume that the tourism sector won't fully recover to the record pre-pandemic numbers over the coming two years." 

Strong protection mechanism

Even though this has left its mark on the balance of payments, Croatia still has strong protection mechanisms against potential external pressure with its high foreign reserves and its swap line with the European Central Bank.

Also, Croatia entered the pandemic period with an improved budget situation and the government could reach out to strong fiscal support measures to relieve the consequences of the pandemic on the labour market.

The budget deficit to GDP this year will amount to 2.9%, which is 0.1 percentage points better than the autumn outlook.

In 2020 the budget deficit amounted to 7.8% of GDP or 1.4 percentage points more than estimated last September.

Next year that deficit could be reduced to 2.0% of GDP and to 1.5% in 2023.

S&P's underlined Croatia's plan for "quick euro adoption is Croatia's key policy goal, after last year's entry into the Exchange Rate Mechanism (ERM II)."

Favourable financing conditions

Due to the pandemic, public debt jumped to a record 88% of GDP in 2020, "however, the government's debt profile benefitted from historically low funding costs and extended debt maturities."

This year it is expected to fall to 84.3% of GDP and below 80% again in 2024.

"We could lower the ratings on Croatia if, contrary to our expectations, external financing pressure was to build or if public finances failed to recover over the coming two to three years, pushing public debt up," S&P said.

The report recalls that Croatia is also entitled to ample EU funds under various envelopes including Next Generation EU and the Recovery and Resilience Facility in the coming years, which will probably contribute to economic recovery.

Additional support should be available for reconstruction efforts following the earthquakes that hit Zagreb in March 2020 and Sisak-Moslavina County in December 2020.

"Net inflows from the EU budget could also support fiscal buffers without unduly constraining investments, which underpins the importance of efficient preparation and the absorption of available funds," S&P's report notes.

For more about business in Croatia, follow TCN's dedicated page.

Tuesday, 23 March 2021

PM Andrej Plenković: Standard & Poor's Report Confirms Stable Situation in Croatia

ZAGREB, 23 March, 2021 - The latest assessment of Croatia by the Standard & Poor's (S&P) credit rating agency shows that Croatia is stable, and the agency's projection of Croatia's growth is similar to to our forecasts of 5% and the forecasts made by the European Commission, Prime Minister Andrej Plenković said on Tuesday.

The Standard & Poor's agency has affirmed its 'BBB-" credit rating on Croatia, with the stable outlook, the government stated earlier on Tuesday.

The credit agency's report says that Croatia's stable political climate and plans to enter the euro area are conducive to reform efforts. The agency projects a general government deficit of 2.9% of GDP in 2021. It also expects Croatia's debt to resume falling and go below 80% of GDP until the end of 2024.

During his visit to Varaždin County, Plenković said that he found it interesting that the credit agency, the EC and some other analyses show that they are aware how much his cabinet had done in the first stage of its term, that is before the COVID-19 pandemic.

In this context he pointed to "a sound and responsible management of the public finances" and the rapid curtailment of the debt.

Plenković also underscored that last July, Croatia entered the European Exchange Rate Mechanism II.

Asked by the press about the latest statement from the Croatian Employers' Association (HUP) that employers were not engaged in the elaboration of Croatia's National Plan for Recovery and Resilience (NPOO), Plenković said that the purpose of the plan is to make use of the 6.3 billion euros of non-repayable grants and after that an additional 3.5 billion euros will be at the disposal through loans.

In the period between those two steps we will focus on the preparation of the new multi-annual financial framework where 12.7 billion euros awaits us, Plenković said, adding that in the end a sum f 30 billion euros wll be available in the next ten years.

Commenting on all those amounts, Plenković said that "this is a true lever for the economic growth and investments as well as for making the economy more resilient."

When it comes to the structure and speculations about how much could be funnelled to the private sector, Plenković said that about 95% of those 6.3 billion euros would end up in the private sector either directly or indirectly.

We are working on the national recovery and resilience plan that has to satisfy three components: 37% of green transition, 20% of digital transition and to make sure that those projects will not be detrimental to some other criteria of the Green Deal, the premier said and announced the presentation of the draft plan for next week.

For more about politics in Croatia, follow TCN's dedicated page.

Sunday, 31 May 2020

S&P Reaffirms Croatian Credit Rating at Minus BBB with Stable Outlook

As Frenki Lausic/Novac writes on the 30th of May, 2020, on Friday night, the credit rating agency Standard and Poor's (S&P) reaffirmed the Croatian credit rating as ''minus BBB'' with a stable outlook, despite the fact that it expects a nine percent drop in gross domestic product this year.

''The reason why we expect a nine percent decline in the Croatian economy is because of the strict measures against the spread of the new coronavirus in Croatia and abroad,'' reads a statement from the aforementioned credit rating agency.

Nevertheless, they believe that the reduction of macroeconomic imbalances in recent years has helped Croatia to be in a better position and better withstand the temporary shock without lasting negative consequences for government borrowing conditions, according to the S&P report, which kept Croatia's investment rating.

The fact that Croatia is highly dependent on tourism, which accounts for twenty percent of Croatia's GDP, is particularly noteworthy, but it is emphasised that the Croatian National Bank (CNB/HNB) has sufficient foreign exchange reserves and a so-called ''swap line'' with the European Central Bank (ECB) which allows for the alleviattion of pressures on the liquidity of the financial system.

It was also added that S&P believes that the Croatian National Bank has enough strength to maintain a stable exchange rate of the kuna against the euro.

''Despite the traditional uncertain political circumstances, Croatia's aspiration to join the Eurozone will have a positive impact on the implementation of some structural reforms in the next two or three years. Progress in improving the business climate, the public sector, the judiciary and productivity could thus result in an increase in income relative to the European Union (EU) average and slow down emigration,'' the report on the Croatian credit rating said.

For more information on the Croatian credit rating and much more, follow our business section.

Friday, 3 April 2020

S&P Revises Outlook on Zagrebački Holding's rating from Stable to Negative

ZAGREB, April 3, 2020 - Standard & Poor's ratings agency has reaffirmed the credit rating for the Zagrebački Holding multi-utility conglomerate at 'B+', revising the company's outlook from stable to negative due to uncertainty regarding the city's ability to provide timely support in light of the COVID-19 pandemic and the March 22 earthquake.

In September 2019, S&P reaffirmed the long-term rating for Zagrebački Holding at 'B+' with a stable outlook.

Following a rating downgrade for the City of Zagreb, the owner of the company, the agency revised the outlook on Zagrebački Holding on Wednesday, saying that it was not certain whether the City of Zagreb could provide timely support to the holding because of the combined effects of the coronavirus outbreak and the recent earthquake.

The agency also cited potential pressures on the holding's liquidity in the near term, which could result in a downgrade.

More Zagreb news can be found in the Lifestyle section.

Sunday, 24 March 2019

S&P Upgrades Croatia's Credit Rating to Investment Category

ZAGREB, March 24, 2019 - Standard & Poor's raised its sovereign credit rating on Croatia to 'BBB-/A-3' from 'BB+/B', putting the country's rating after six years back into the investment category owing to an improved situation in the budget and economic recovery.

The BB+/B rating describes a country's debt securities as speculative investment, while BBB-/A-3 is an investment category. In December 2012, S&P downgraded Croatia's rating to a non-investment category. The outlook now is stable.

"The upgrade reflects Croatia's improving fiscal metrics, underpinned by its recent economic recovery thanks to tax-rich domestic demand, but also fiscal consolidation measures implemented by the authorities.

"The general government has run primary fiscal surpluses since 2015, including of 3% of GDP on average in 2017-2018, with public debt as a share of GDP declining by 10 percentage points between 2015 and 2018.

"Risks to GDP performance, public finance, and financial stability emanating from the bankruptcy of Croatia's largest food retailer Agrokor have abated. We also view the likelihood of fiscal slippages – from the payment of state guarantees against Uljanik shipyard's debt liabilities – as reduced," S&P says.

"Croatia's recent economic performance has been solid and balanced. Growth has been accompanied by recurring current account surpluses, driven by buoyant tourism-related inflows, allowing net external leverage to reduce severalfold to just 13% of GDP in 2018.

"The stable outlook balances the potential for a reform-driven faster income convergence with wealthier trading partners against risks emanating from external uncertainties.

"We could raise the ratings over the next two-to-three years if Croatia's economic growth proves resilient to Europe's cyclical slowdown, allowing continued convergence with EU average income levels and possibly aided by removing structural impediments to growth. If public debt reduced faster than we currently anticipate, this could also prove positive for the ratings.

"We could lower the ratings if we observed a material economic downturn, possibly driven by a significant weakening in the external environment, which would reverse recent fiscal gains. An emergence of higher-than-expected contingent liabilities could also put pressure on the ratings if such liabilities caused a sizable fiscal drain or a drag on the economy.

"External debt has declined amid ongoing export growth and persistent current account surpluses. Recent fiscal improvements also support the ratings," S&P says.

After in 2018 Croatia's economy grew by 2.6%, S&P expects economic growth to moderate to around 2.5% on average in 2019-2022. "The government has implemented tax and pension reform this year, but demographic trends will continue to weigh on the public purse."

"Croatia's economy has seen resilient growth since emerging from recession in 2015. In its flagship tourism sector, tourist arrivals have almost doubled since 2010 to around 20 million visitors in 2018.

"While tourism-related revenues amount to almost 20% of GDP, manufacturing as well as other services such as transportation are also important contributors to GDP," S&P says, noting that personal consumption will remain strong, helped by rising employment and wages as well as tax reforms.

"Investment should benefit from increasing EU fund absorption, public infrastructure investments such as the Pelješac bridge, soaring construction activity generally, and the effects of recent tax reforms.

"Net exports will detract from growth in 2019-2022 as domestic demand pulls in imports. Goods exports already started decelerating in 2018, which could worsen if there is a sizable and protracted slowdown in key trading partners such as Italy or Germany."

"Croatia has made progress on important structural reforms. The third round of taxation reform took effect in January 2019, among other things reducing the VAT rate for certain items. This in turn is set to stimulate disposable incomes, while reduced labour costs for employers could support investment activity."

"According to preliminary estimates, Croatia posted a general government surplus in 2018 for the second year in a row. This was supported by higher tax revenues but also expenditure savings, for example on the interest bill."

"The 2018 fiscal results could have been even better if the government guarantee for the struggling Uljanik shipyards had not been activated," says S&P.

S&P analysts estimate that the net general government debt will decline to just below 60% of GDP by 2022 from the 75% peak in 2015. They also estimate that inflation will be contained at about 1.5% on average over the coming two to three years.

They note that Croatia will be chairing the Council of the EU in the first half of 2020 and that it hopes to join the Exchange Rate Mechanism (ERM II) that same year.

Since early 2018 the country's rating or outlook have been upgraded by the world's three leading rating agencies, with S&P now having raised the country's rating to the investment category.

Fitch is keeping Croatia's rating one grade below and Moody's two grades below the investment category, with Fitch describing the country's outlook as positive and Moody's as stable.

More news on Croatia’s credit rating can be found in the Business section.

Saturday, 22 September 2018

S&P Upgrades Croatia’s Credit Rating Outlook

ZAGREB, September 22, 2018 - Standard&Poor's (S&P) has affirmed its 'BB+/B' long- and short-term local and foreign currency ratings on Croatia but it has revised its outlook on the country to positive from stable, owing to expectations that the country's economy will continue to grow and fiscal indicators will continue to improve.

Saturday, 24 March 2018

Government Satisfied with Credit Rating Improvement

ZAGREB, March 24, 2018 - Prime Minister Andrej Plenković told Hina that Standard & Poor's decision to rise Croatia's credit rating was very good news, particularly the agency's very positive assessment of tax reforms and announced further implementation of structural reforms.

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