Finance Minister Zdravko Maric said that Croatia should not expect an upgrade to investment rating by the major rating agencies this year, local media reported interviews of the minister at the sidelines of the Euromoney conference. He acknowledged that the tax reform, which reduced the tax burden, and the responsible fiscal policy that keep expenses under control, the faster-than-expected economic growth this year and the reduction in public debt, which was not anticipated by rating agencies for last year, are all positive things. However, for such an upgrade of two notches to reach investment grade, more results need to be still achieved, the minister admitted. All three major rating agencies rate Croatia two notches below investment grade (Ba2 by Moody’s, and BB by Fitch and S&P) with Moody’s and Fitch keeping the outlook negative. S&P revised the outlook on its sovereign rating to positive a month ago noting that an upgrade might follow if economic recovery remains on track; government shows ability and willingness to implement structural reforms and stick to fiscal consolidation. S&P’s outlook improvement was the first improvement of the sovereign rating in the past nine years. Maric said back then that the authorities will continue with the health reform and public administration reform as next steps. He also noted that the government might adopt the debt management strategy in near terms (by end of January, according to later statements). We note that upgrading the country’s rating is a major ambition of the current but also of the previous government.
Maric also spoke about the banking sector announcing expectations for some rebound in crediting and a start of a new credit cycle following a six-year crisis in which bad loans were accumulated and banks and customers developed lower appetite for risk. He said he expected more projects in the banking sector in 2017, including on account of EU funds absorption.