“Rating Agencies Should Start Thinking about Upgrading Croatia’s Credit Rating”

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Deputy Prime Minister Dalić believes that credit rating agencies are too cautious.

Deputy Prime Minister and Minister of Economy, Entrepreneurship and Crafts Martina Dalić said that Fitch’s recent decision to retain the previous credit rating of Croatia was expected, but added that she believed that agencies should start thinking about upgrading it, reports Jutarnji List on 17 July 2017.

Fitch announced on Friday that it had decided to maintain the current rating of Croatia at BB with a stable outlook, pointing out that the Croatian economy benefited from favourable cyclical conditions, but that Agrokor’s restructuring would slow down growth to 2.6 percent in 2017.

“I believe that Fitch’s decision to keep the credit rating was expected. This expectation is based on the economic trends around us and on generally positive economic trends, stabilisation of the fiscal situation and leaving the excessive deficit procedure,” said Dalić.

She added that these were precisely the arguments that should make agencies think about upgrading Croatia’s rating because positive trends started one and a half years ago. “The fiscal situation is continuously improving, public debt has begun to decline for the first time in a number of years, and we also see clear positive trends in the real sector, both in manufacturing and in exports. Finally, the political situation has stabilized, and we have three years of the stable political period without elections ahead of us,” said Dalić.

Fitch estimates that the problems in Agrokor would spread to suppliers and banks. This will, as the agency points out, have an impact on employment, investment and credit growth and slow down GDP growth from last year’s 3 percent to 2.6 percent this year.

When asked about Fitch’s assessment, Dalić said that the biggest risks and the greatest dangers associated with Agrokor had passed. “The extraordinary administration has prevented the uncontrolled bankruptcy of Agrokor, and stopped the uncontrolled spreading of Agrokor’s bankruptcy to suppliers,” said Dalić.

She argued that it was certain that individual problems might arise in the upcoming period, especially in cases where Agrokor and individual suppliers had established “totally inappropriate relations.”

“When we talk about the spill-over mentioned by Fitch, I would like to remind you that we have sent to the public consultation process amendments to the Law on Bankruptcy, which will also provide for the ability of borrowing funds for companies undergoing the pre-bankruptcy proceedings, under certain conditions,” said Dalić.

According to Dalić, the appointment of the extraordinary administration in Agrokor has prevented the biggest systemic risks. The trend of industrial production growth in May, which showed an increase in comparison with April and the same month last year, confirms this, concluded the Deputy Prime Minister.


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