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.
