Dun&Bradstreet (D&B), an international provider of credit information and credit reports covering over 130 countries, again assigns DB3d country risk indicator to Croatia, which puts it among the countries with slight risk and with stable ratings trends.
According to the latest report for April, which was carried out by the Zagreb-based Bonline company on Tuesday, "Croatia's external risk remains relatively high owing to the chronic fiscal and current account deficit that need to be financed each year, and due to the rising level of external indebtedness."
This international company estimates that Croatia's total external debt climbed above USD 60 billion in 2009 and that it would likely further rise over the following two years.
D&B estimates that the net Foreign Direct Investments inflows will finance only a part of the gross external financing requirement which is why the remainder "will be met by fresh borrowing".
"If global credit markets were to dry up again in the way they did at the end of 2008, Croatia could be forced to seek funding from the IMF (International Monetary Fund)."
"Such funding would come with conditions attached, including more stringent fiscal consolidation, which would prolong the economic downturn."
"Meanwhile, total debt service due (principal repayments plus interest on medium- and long-term debt), will rise from 49.4% of total export earnings in 2008 to 60.6% by 2011, increasing Croatia's vulnerability to any further disruptions in the international money markets, especially if the foreign parents of Croatian banks were to suffer financial problems (although this risk seems relatively low currently)."
D&B reports that transfer and convertibility risks should remain low as the Croatian National Bank (HNB) uses market interventions "to keep the exchange rate steady (against the euro).
The report reads that 23.5 % of Croatian companies' cross-border payments "arrived 30 or more days over terms in the year to end-Q4 2009."
"Some 65.0% of payments were paid promptly in the same period, while 8.9% of payments were paid 60 or more days over terms".
"The data show that 2.2% of payments were severely delinquent, with delays of 120 days or longer".
Therefore D&B recommends to foreign investors "the use of LC terms when trading with counterparts" in Croatia.
According to latest D&B country reports in the International Risk&Payment Review publication, the credit rating has been changed in six countries: the Netherlands, Chile, Greece, Iceland, Argentina and Guatemala.
In Croatia's neighbourhood, Slovenia has the best rating with the DB2c risk indicator, and is followed by Croatia and Hungary with DB3d.
The following countries are Albania (DB4a), Macedonia (DB4b), Serbia (DB4d) and Bosnia-Herzegovina (DB6a).
