S&P cuts Zagreb

S&P said it lowered its long-term issuer credit rating on the city of Zagreb to BB- from BB.

“We have lowered our long-term rating on Zagreb, given our view that its contingent liabilities will increase substantially in light of a newly passed law under which the city will have to cover 20% of repair costs from the March earthquakes. According to current estimates, the cost to Zagreb may exceed the city's annual budget by more 2x, although it would be spread over more than a decade,” S&P said in a press release.

S&P said it also sees the city’s budgetary performance deteriorating in 2020 and 2021, due to pandemic-related shortfalls in tax revenue and additional expenditure. However, S&P said it also anticipates the central government will compensate the city for tax shortfalls.

The outlook is negative.

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