Improvement of Croatia's credit rating to A- due to stable growth

Improvement of Croatia's credit rating to A- due to stable economic growth, political stability, and energy investments

Standard & Poor's has upgraded Croatia's credit rating to A-, recognizing stable economic growth, fiscal responsibility, and effective use of European funds. Energy security has been further strengthened by the construction of the LNG terminal on Krk

Improvement of Croatia
Photo by: vlada.gov.hr/ vlada.gov.hr

The credit rating of Croatia has received a significant upgrade from Standard & Poor's, elevating it to an A- level, which indicates stable progress in the country's economy. Croatia is currently facing challenges on a global scale, including inflationary pressures and energy crises, but despite this, the rating is affirmed thanks to fiscal consolidation and strategic use of European funds. Economic growth projections for Croatia have been revised to 3.5% for 2024, and tourism is expected to remain the main driver of growth. Additionally, the diversification of energy sources, including the construction of an LNG terminal on Krk, has contributed to reducing reliance on Russian energy sources, ensuring the country's long-term energy security.


Fiscal consolidation and economic growth


Standard & Poor's emphasizes that the Croatian government has made significant progress in reducing public debt, which is now below 60% of GDP. This achievement is the result of prudent management of public finances and effective absorption of European funds, including over 40% of allocated funds from the Recovery and Resilience Mechanism. S&P highlights that this fiscal responsibility is crucial for further economic growth and for ensuring the confidence of domestic and foreign investors.


In addition to European funds, the Croatian government is benefiting from favorable monetary conditions provided by the European Central Bank, which further strengthens the economy. Access to European financial institutions allows for more stable financing conditions, while Croatia's entry into the eurozone significantly reduces currency risks. It is expected that the share of debt denominated in foreign currencies, currently around 70%, will decrease almost to zero, representing a key shift in the stability of the country's public finances.


Key reforms and energy independence


One of the main factors contributing to the increase in the credit rating is the ongoing implementation of structural reforms, particularly within the judiciary, education, and broader business environment. S&P notes that political stability is crucial for continuing these reforms, and that further integration of Croatia into European institutions could further strengthen institutions and the business environment.


Regarding energy security, Croatia has taken concrete steps to ensure supply stability. The construction of an LNG terminal on Krk has allowed for the diversification of energy sources, significantly reducing the country's reliance on Russian energy sources. This energy independence is crucial for long-term economic growth, and projects like the LNG terminal provide energy supply security for both domestic and international needs.


It is forecasted that the Croatian economy will continue stable growth in the coming years, despite current global challenges. S&P predicts that inflation will remain a short-term challenge, but Croatia will be in a better position compared to many other European countries thanks to a combination of fiscal responsibility, strong tourism, and stable use of European funds.

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