March 30 (SeeNews) -
S&P Global Ratings said it has revised to positive from stable the outlook on the Croatian capital Zagreb thanks to improving financial results, and affirmed its 'BB' long-term foreign and local currency credit ratings of the city.
“The positive outlook reflects our view that strain on Zagreb's financial results might recede as projected economic growth and tight expenditure controls should help mitigate spending pressure from high inflation and large capital expenditure needs,” S&P Global Ratings said in a press release last week.
The outlook revision reflects Zagreb's improving liquidity situation since the start of 2023 and continued economic resilience with positive GDP growth forecast for 2023-2025, the global ratings agency noted.
“We expect tax revenue to rise significantly despite low economic growth in key Croatian trading partners like Germany. The ratings take into account Zagreb's moderately high tax-supported debt and a volatile policy environment, with potentially rising tensions between government tiers as elections both on the national and municipal levels get closer,” S&P said.
Zagreb will continue to receive funds from the European Union and the Croatian government until mid-2023 to rebuild public infrastructure damaged by the March 2020 earthquakes, and will continue to receive some cohesion funds thereafter. The city's share of the cost of rebuilding private properties will be spread over a couple of years, which should ease the burden on yearly expenditure.
“We could raise the rating on Zagreb if, over the next 12 months, the city increased predictability on its financial policy while maintaining focus on cost controls, and continues to strengthen its liquidity position by covering a substantial portion of annual debt service,” S&P said.