Standard & Poor’s Improves Croatia’s Credit Rating

Standard & Poor’s Ratings Services raised its long-term currency credit ratings on the Republic of Croatia from BBB- to BBB on 22 December, while the rating for the A-3 short-term foreign currency and BBB+/A-2 local currency ratings on Croatia remained the same.

Standard & Poor’s Improves Croatia’s Credit Rating Standard & Poor’s Ratings Services raised its long-term currency credit ratings on the Republic of Croatia from BBB- to BBB on 22 December, while the rating for the A-3 short-term foreign currency and BBB+/A-2 local currency ratings on Croatia remained the same. This is the first upgrade Croatia has received from Standard & Poor’s in seven years, and follows closely on the heels of the decision of the European Council on 17 December to set the date to open accession negotiations with Croatia on 17 March 2005. Standard & Poor’s issued a press release that stated: “The upgrade reflects Croatia’s strong track record of reforms and structural economic improvements over the past few years, as well as the ongoing stabilization of the public and private sectors’ external debt levels.” It went on to state that the country’s newfound EU candidate status provides a strong policy anchor, spurring efforts to modernize the legal, regulatory, and judicial systems, and to improve corporate governance standards. The EU integration process is also expected to drive increases in greenfield foreign direct investment. Real economic growth is forecast at 4.0%-4.5% per year in the medium term. “This is certainly a great success that will be noticed in international financial institutions and is expected to have a positive impact on interest rates,” Croatian Prime Minister Ivo Sanader said. The new credit rating has also improved the credit rating of the long-term foreign currency debt of the Croatian Bank for Reconstruction and Development (HBOR) from BBB- to BBB. The Croatian National Bank has announced that this year’s inflation rate, measured by consumer prices, will be around 2.3% and estimates that the inflation rate of 2005 will not exceed 2.5%. Croatia’s industrial production growth rate is expected to measure 3.9% in 2004.

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