June 13 (SeeNews) - Multinational bank Barclays has advised investors to shift their focus from Croatian securities to the capital markets of Serbia and Hungary to avoid political instability in the Adriatic country, Zagreb-based media reported.
In a report issued late last week Barclays said that although Croatia is on a path of recovery after six years of recession, the current political turmoil has started taking a toll on state finances, news daily Jutarnji reported.
Serbian and Hungarian securities give equal yields but these countries have more stable governments, Barclays noted.
Croatia is currently facing two scenarios - a government reshuffle or a snap vote with both the prime minister, Tihomir Oreskovic, and his deputy, the leader of the ruling HDZ party Tomislav Karamarko, up for a no-confidence vote as early as next week.
On the sidelines of the political turmoil, Croatia’s finance ministry announced recently it is postponing a planned Eurobond issue until the crisis has settled.
Barclays also commented that in the absence of true reforms, Croatia's public debt has more than doubled from 39% of GDP prior to the crisis in 2008 to 85.1% of GDP in 2014.
The lender added that the composition of the parliament makes it difficult to assemble a new coalition, while new elections might not necessarily bring about a significant change in the power balance on the political scene.
Croatia's political crisis escalated last month when ministers of the smaller coalition partner, MOST, voted in support of a motion launched by the opposition Social Democrats (SDP) for a no-confidence vote against Karamarko over alleged conflict of interests. Following the vote, second deputy prime minister and MOST leader Bozo Petrov called for Karamarko's resignation, prompting the prime minister to demand that both deputy prime ministers step down. MOST has since backed the prime minister and demanded Karamarko's resignation or a snap vote. Karamarko, however, claims his party still has time to muster a new majority.