Finance Minister Slavko Linic on Thursday said that he did not have any objections to Fitch's assessment in which the agency downgraded Croatia's outlook from 'stable' to 'negative', adding that he did not think that this should impact the price of Croatia's borrowing as its credit rating has remained unchanged.
Fitch also affirmed Croatia’s Long-term foreign-currency Issuer Default Rating (IDR) at 'BBB-' and Long-term local currency IDR at 'BBB' and cautioned that the draft 2013 budget brings into question the credibility of medium term fiscal consolidation which is vital to put debt dynamics on a sustainable path.
We haven't yet adopted the 2013 budget and this will probably be done on Tuesday yet we have the first reaction - Fitch has affirmed Croatia's credit rating but has changed its positive forecast of Croatia's outlook to negative which means that they have expressed their concern for Croatia's rating in response to the state budget, said Linic commenting on a statement released by the Fitch agency earlier in the day.
Linic explained that Fitch is particularly concerned with allocations which we ourselves assessed as such, which widen the deficit in the state budget due to investments into the Croatian water company and Croatia's state road operator which account for 0-7% of the deficit and which are allocated to debts, as well as expenditure relating to EU membership, higher interests and continuing structural changes in the shipbuilding sector.
Questioned whether the government was perhaps a little too optimistic with its projected 1.8% growth of GDP, while Fitch has forecasted a growth of only 0.3%, Linic once again said that savings were not possible if investments did not grow.
Investments in production are a challenge for the government that aims to reduce enormous imports which means a battle on the domestic market. The crisis in Europe will not shoot down our optimism if we manage to be efficient in implementing investment programmes, he said, justifying his optimism compared to the scepticism expressed by the Fitch agency.
The finance minister believes that the change in Fitch's forecasts should not have any great impact on the price of foreign loans for Croatia, because it is credit rating and investment rating that is important.
He added that the Standard & Poor's will soon be giving its assessment, as he believes that this credit rating agency is waiting for the budget to be adopted. "If that agency keeps Croatia's current credit rating then there should not be any significant changes to foreign loan conditions," Croatia's finance minister said.
