Croatian Government Comments on Fitch’s Credit Rating Decision

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Croatian PM responds to Fitch ratings agency. 

Croatian Prime Minister Tihomir Orešković said that results were more important than political experience. That was his comment on the decision by the Fitch rating agency to keep a negative outlook for Croatian credit rating and its doubts about his lack of political experience to be prime minister and about the strength on ruling coalition. On Friday, Fitch confirmed the current long-term Croatian credit rating in foreign currency at “BB” and in local currency at “BB+”, and also confirmed a negative outlook for the future, reports Jutarnji List and Vecernji List on January 31, 2016.

“The former government had four years and political experience, but credit rating was lowered twice. So I do not know how important political experience is. The results are what is important”, said Orešković to reporters yesterday evening. “They have sent us a message, just like other investors, agencies and the European Commission. If they see results, they will change the rating”, the Prime Minister said, adding that his message was clear. “I have been very clear during the last month and a half. The debt is at 90 percent, we expect reforms to reduce the deficit and debt. Until they see results, credit rating will not change”, said Orešković.

“If they see that the debt begins to fall, that there are reforms visible in the new budget, the rating will be changed in a positive direction. We are ready to focus on the public debt”, concluded the Prime Minister.

Speaking about the same issue, Finance Minister Zdravko Marić said that it was good news that Croatia had held its rating since the new government had just taken over and pointed out that the budget will be the first test and the basis for future changes in Croatian credit rating. “In this way, the new government has been given a period of time in which they expect to see and hear specific measures which will be taken. On the other hand, the report includes a section about how the agency believes the rating could be improved. They were very clear in terms of economic growth and the sustainability of public debt”, said on Saturday Finance Minister Marić.

He expressed his belief that the government will prove that the suspicions which Fitch expressed were unfounded and stressed that the budget will be the first test. “We want the budget to be a showcase of what the government is planning to do this year”, said Marić. He pointed out that the objective of the government was to reduce the deficit to 3 percent of GDP in the next two years. More details will be announced in the guidelines for economic and fiscal policy which will be released in two weeks and which will provide a framework for targeted levels of deficit, debt and other indicators.

The minister did not specify whether it was possible to reduce spending by 4.5 billion kuna. He also said that there is no need for new employment in state administration and ministries. With better and more effective implementation, all the set objectives can be met, he concluded.


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