Moody’s Cites the Benefits of Replacing the Croatian Kuna with Euro

Moody’s Investors Service discussed the benefits for Croatia of replacing the Croatian kuna with the euro.

This bond credit rating agency has also positively evaluated the institutions of the country located at Southeast and Central Europe’s crossroads and reminded that the nation spent only two years waiting to be approved for euro adoption.

We want to keep our readers updated about the developments regarding the foreign currencies they are holding. We believe this foreign exchange-related report about the Croatian kuna will help them stay properly informed, so we are posting it on our website.

According to the update posted online by Croatian media outlet The Dubrovnik Times, which delivers news and viewpoints from Croatia and its southern city of Dubrovnik, the Croatian Kuna is Croatia’s current official currency.

Its exchange rate is pegged to the euro, although the Croatian economy is already largely integrated into the eurozone economy. At the time of writing this forex news, US$1 is equivalent to 7.13 Croatian kunas and 0.95 euros, per forex conversion website

Last Friday, June 17, the European Union’s (EU) Financial and Monetary Policy Council recommended Croatia’s entry into the eurozone early next year.

The EU leaders subsequently adopted the endorsement at a summit last Thursday, June 23 and Friday, June 24. Moody’s proclaimed that it could raise Croatia’s credit rating to the investment category after the EU recommended the country join the eurozone.

The bond credit rating agency cited that eliminating the Croatian kuna will deliver many advantages to Croatia. First is, it would mainly reduce the public debt share denominated in foreign currency from 70 percent to zero.

Moody’s relayed that Croatia’s adoption of the euro will also have significant positive implications for its credit profile and considerably enhance this agency’s evaluation of the Croatian government’s fiscal strength, which is an important assessment factor.

Moody’s pointed out that eliminating the Croatian kuna would enable Croatia to get rid of the risk of increased debt as a share of gross domestic product or GDP in the event of currency depreciation.

Croatia will benefit by joining the eurozone as borrowing risks and transaction costs will be significantly reduced. Replacing the Croatian Kuna with the euro will eliminate the remaining foreign exchange risks in transactions with the eurozone as well, according to Moody’s.

The bond credit rating company said that euro adoption would likely boost foreign direct investment and economic integration further in Croatia and bolster this territory’s long-term growth potential.

Moody’s remarked that getting rid of the Croatian kuna will decrease foreign exchange risks for the banking sector and have a positive effect on its evaluation of Croatia’s vulnerability to external risks and government liquidity.

The euro will be the official Croatian currency beginning January 1, 2023, replacing the Croatian kuna. This development makes Croatia the 20th eurozone member on New Year’s Day next year and is the first-ever enlargement of the euro area since 2015, when Lithuania joined it.

We are glad to learn about the benefits for Croatia that replacing the Croatian kuna with the euro brings.

We think the commencement of 2023 is an exciting time for this nation situated in Central and Southeast Europe, as the euro adoption will deliver many economic and financial advantages there.

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