Croatia's Prime Minister said the country was in no rush to enter the foreign bond market despite recent upgrades to its credit rating. Prime Minister Andrej Plenković signaled that Croatia is being extremely careful when it comes to foreign debt after a set of credit confirmations from key ratings agencies.
"We are not in a hurry to issue a foreign bond," said Plenkovic in an interview. "Recent upgrades are a reflection of our strong economic fundamentals and further steps taken by us to ensure fiscal stability."
This follows Moody's Investors Service upgrading Croatia's sovereign credit rating to 'Baa2' from 'Baa3', a similar move to what was made by Fitch Ratings and S&P Global Ratings, which previously raised the country's credit score earlier this year. In the main, this move stands out as a vote of confidence in Croatia's financial stability and the way the economy is being run.
Despite all this positivity in the market, it would appear that the Croatian government can afford to be patient. "We won't rush into capital markets because we have successfully managed our financial needs internally," the Prime Minister said.
Analysts attribute this apparent reluctance of Croatia to tap immediate international capital markets to the belief that the country is satisfied with current inflows and domestic mechanisms of funding. Why hurry when foreign exchange reserves are stable, economic growth has become consistent, with no urgency to issue a new foreign bond?.
The economy of Croatia continues to see a stable recovery process after the COVID-19 pandemic, while its most important driver of such economic growth-the tourism sector-continues to be resilient and performs well. This is coupled with strategic focusing on economic reforms and investments that have bolstered investor confidence.
The Croatian government has, nonetheless, been interested in pursuing a prudent borrowing policy with the hope of not burdening itself frivolously in the long run. This kind of attitude is very prudent and reasonable, as the country is supposed to enter the foreign bond market only if this action coincides with its wider goals and conditions, according to experts.
"We seek to balance our financing needs with our growth projections with a view to long-term fiscal soundness," Plenković said, in repeating the commitment of the government to good financial planning.
The plan to avoid new foreign bond issuances would be in keeping with the mood in Europe where many countries are reassessing their borrowing methods as higher market volatility and geopolitical uncertainty take firmer holds.
With Croatia building on the recent economic progress, the approach by the government insinuates that it would prefer stability, well planned, to fast financial moves. This has gone down well with local and international investors who view it as maturity and dependability in the nation's financial governance.
In a nutshell, Croatia's move underlines the role of timing and market conditions in the management of sovereign debt. By delaying the foreign bond issue, Croatia is trying to use the current economic momentum to further solidify its fiscal position.
"We are confident in our course and will carefully evaluate the timing for our next steps in the foreign bond market," Plenković concluded, leaving the door open for future opportunities but only under the right conditions.
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Author: Daniel Foster
