Fitch Ratings on Friday affirmed Croatia’s rating at ‘BBB-‘, with a stable outlook, highlighting big short-term risks related to the pandemic as well as the medium-term outlook for economic growth thanks to the EU’s financial support.
Fitch also upgraded the projection for Croatia’s economic growth in 2021 from 3.8% to 5.5%, forecasting GDP growth to accelerate to 6.1% in 2022.
“That’s very good news, that according to the Fitch credit agency too Croatia’s credit rating continues to be in the investment zone with a stable outlook,” Marić told the press.
He said he was pleased that Fitch’s report summed up objectively and well all the key circumstances that impacted the rating.
The agency’s emphasis is on the process of joining the Economic and Monetary Union, he added.
“The report says what introducing the euro means for the credit rating. It would mean a jump of two notches up, which would bring us into a comfort zone. On the other hand, there’s the National Recovery and Resilience Plan,” Marić said, adding that emphasis was put on its implementation, which he expects to begin towards the end of the year.
Public finance is the third segment and it’s good that rating agencies underline that in this crisis fiscal stimulants should last as long as necessary so as to save jobs and people’s health, he said.
“When the pandemic is behind us, we will sum up the effects. When you look at it all together, the deficits, notably on the public debts of the EU member states, including Croatia, the debts are not small.”
He said the effect of one year of the pandemic in Croatia had neutralised the four years when the public debt was being reduced, by about three percentage points every year.
Last year Croatia’s public debt grew to over HRK 36 billion, mainly because of the costs of fighting the pandemic.
Fitch raised the public deficit forecast from 3.5 to 4% of GDP in 2021 and forecasts a fall to 3% in 2022, up by 0.8 percentage points from the forecast made last December. Public debt/GDP should fall to 82.7% of GDP in 2022 from 88.7% in 2020, Fitch said, forecasting Croatia’s eurozone entry for 2024.
COVID aid for businesses in line with circumstances, trends
Asked if aid for businesses affected by the pandemic would continue after June, Marić said the measures were adopted in line with the circumstances and that trends both in Croatia and abroad were being followed.
Speaking of aid for travel agencies, the event industry and occasional transport, Marić said the coverage of fixed costs in force since December would be applied.
For those that are closed, other solutions are being sought and the relevant ministries are working on programmes to help them, he said, adding that the idea was to give them some incentive once the summer tourist season started.
Asked about reforms related to the National Recovery and Resilience Plan, notably in health, Marić said the Plan referred to the period until 2026 and that he hoped Croatia would be prompt and efficient in implementing it. He expects 13% of the advance to be drawn by the end of this year.
Speaking of budget revenues, Marić said they were as expected at the moment and that some tax revenues were very good.
Fiscalisation is at 99%, one percent less than at the same time in 2019, he said, adding that the indices in retail were over 100%, with some categories recording growth from five to eight percent.
Tourism and hospitality are markedly below and the key topic at the moment is expenditures, he said.
Asked about this year’s possible inflation rate, Marić said that last year it was 0.1% and that some inflationary pressure could be expected, both globally and in Croatia, adding that in Croatia inflation had always been within sustainable levels.
Commenting on an economist’s proposal to use European funds for new tax cuts in all segments instead of projects, Marić said the rules were set by the European Commission.
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