Zagreb's credit ratings raised by S&P Global

“We think that the institutional framework for Croatian municipalities has strengthened, as transparency and accountability standards gradually improve,” the credit rating agency said on Friday.

Croatia's eurozone accession last year and its continuous alignment with EU practices provide important policy anchors, it added.

“The positive outlook reflects our view that improving management practices, rising income, and better funding access in the wake of eurozone accession could further strengthen the city's creditworthiness,” it added.

The credit rating agency said that the resilience of Croatia's economy despite a subdued economic environment in Europe underpins its projection of sound tax revenue growth for Zagreb. “We project the city's economy will continue to expand in tandem with the robust growth that we project for Croatia”.

S&P Global Ratings’ projections for Croatia factor in growth of 2%-3% over 2024-2027. “This reflects continued dynamism of the tourism sector and benefits from the 2023 eurozone accession, as well as substantial EU-funded investments,” it said.

Croatia is among the top EU countries in terms of the share of funds already disbursed from the Recovery and Resilience Facility (RRF). Zagreb is set to ramp up its investment activities by utilising RRF and other EU funds, which will have a positive long-term economic impact, S&P Global Ratings noted.

Zagreb's sizable investment agenda--for example in public buildings, public transport, and digital and revitalisation projects--will lead to an increase of tax-supported debt to 86% of operating revenues in 2026 from 81% in 2024, it added.

In its view, Zagreb's liquidity situation has improved compared with previous years. Cash on hand increased to 105 million euro ($114 million) on average in December 2023 from 19 million euro the year before, substantially raising the coverage of the next 12 months' debt service and financing needs.

($ = 0.924 euro)