Obligation Centralna Vlada 1.5% ( XS2190201983 ) en EUR

Centralna Vlada

100 % ▲

Croatie

XS2190201983 ( en EUR )

1.5% par an ( paiement annuel )

17/06/2031 - Obligation échue

Prospectus brochure de l'obligation Central Government: Republic of Croatia XS2190201983 en EUR 1.5%, échue

100 000 EUR

2 000 000 000 EUR

Le gouvernement central de la République de Croatie est composé du Parlement (Sabor), du Président et du Gouvernement (Cabinet).

L'Obligation émise par Centralna Vlada ( Croatie ) , en EUR, avec le code ISIN XS2190201983, paye un coupon de 1.5% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le 17/06/2031

REPUBLIC OF CROATIA
2,000,000,000 1.500 per cent. Notes due 2031
Issue price: 98.572 per cent.
The issue price of the 2,000,000,000 1.500 per cent. Fixed Rate Notes due 2031 (the "Notes") issued by the Republic of Croatia (the "Issuer", the
"Republic" or "Croatia"), will be 98.572 per cent. of their principal amount. The Notes will mature on 17 June 2031 at their principal amount.
The Notes will be in registered form in denominations of 100,000 and integral multiples of 1,000 in excess thereof. Interest on the Notes will
accrue at the rate of 1.500 per cent. per annum from and including 17 June 2020 and will be payable in Euro annually in arrear on 17 June in each
year, commencing on 17 June 2021. Payments on the Notes will be made without withholding or deduction for or on account of taxes imposed by
the Issuer except to the extent described under "Terms and Conditions of the Notes -- Taxation".
This Offering Circular neither constitutes a prospectus pursuant to Regulation (EU) 2017/1129 (the "Prospectus Regulation") nor a light prospectus
pursuant to Part III of the Luxembourg Act dated 16 July 2019 on prospectuses for securities (the "Luxembourg Act"). Accordingly, this Offering
Circular does not purport to meet the format and the disclosure requirements of the Prospectus Regulation and Commission Delegated Regulation
(EU) No. 2019/980, and it has not been, and will not be, submitted for approval to any competent authority within the meaning of the Prospectus
Regulation and in particular the Commission de Surveillance du Secteur Financier, in its capacity as competent authority under the Luxembourg Act.
The Issuer is rated Ba2 (positive outlook) by Moody's Investors Service, Inc. ("Moody's"), BBB- (stable outlook) by S&P Global Ratings Europe
Ltd. ("S&P"), and the Issuer has a long term foreign currency issuer default rating of BBB- (stable outlook) by Fitch Ratings Ltd. ("Fitch"). The
Notes will be rated Ba2 by Moody's, BBB- by S&P, and BBB- by Fitch. A rating is not a recommendation to buy, sell or hold securities and may be
subject to revision, suspension or withdrawal at any time by the assigning rating organisation. As at the date of this Offering Circular, S&P and Fitch
are established in the European Union ("EU") and the United Kingdom ("UK") respectively and registered under Regulation (EU) No 1060/2009 (as
amended) (the "CRA Regulation"). Moody's is not established in the European Economic Area ("EEA") or in the UK but the rating it has given to
the Notes is endorsed by Moody's Investors Service, Ltd, which is established in the UK and registered under the CRA Regulation. As such, each of
the rating agencies is included in the list of credit rating agencies published by the European Securities and Markets Authority ("ESMA") on its
website in accordance with such Regulation. In general, European (including UK) regulated investors are restricted under the CRA Regulation from
using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the EU or the UK and registered
under the CRA Regulation (and such registration has not been withdrawn or suspended), subject to transitional provisions that apply in certain
circumstances whilst the registration application is pending. Such general restriction will also apply in the case of credit ratings issued by non-EU
and non-UK credit rating agencies, unless the relevant credit ratings are endorsed by an EU-registered or UK-registered credit rating agency or the
relevant non-EU and non-UK rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the
case may be, has not been withdrawn or suspended). If the status of the rating agency rating the Notes changes, European (including UK) regulated
investors may no longer be able to use the rating for regulatory purposes and the Notes may have a different regulatory treatment. This may result in
European (including UK) regulated investors selling the Notes which may impact the value of the Notes and any secondary market. The list of
registered and certified rating agencies published by ESMA on its website in accordance with the CRA Regulation is not conclusive evidence of the
status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant
rating agency and the publication of the updated ESMA list. Certain information with respect to the credit rating agencies and ratings is set out in the
sections entitled "There can be no assurance that Croatia's credit ratings will not change" and "Credit Ratings may not reflect all risks" of this
Offering Circular.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or any state
securities law, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
MIFID II product governance / Professional investors and eligible counterparties only target market Solely for the purposes of each
manufacturer's product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for
the Notes is eligible counterparties and professional clients only, each as defined in Directive 2014/65/EU (as amended, "MiFID II"); and (ii) all
channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or
recommending the Notes (a "distributor") should take into consideration the manufacturers' target market assessment; however, a distributor subject
to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer`s
target market assessment) and determining appropriate distribution channels.
The Notes will initially be represented by a global certificate (the "Global Certificate"), in registered form, without interest coupons attached and
will be registered in the name of a nominee of a common safekeeper for Clearstream Banking S.A. ("Clearstream, Luxembourg") and Euroclear
Bank SA/NV ("Euroclear"), on or about 17 June 2020 (the "Closing Date"). The Notes will be issued in the New Safekeeping Structure ("NSS").
This means that the Notes are intended to be registered in the name of a nominee of a common safekeeper for Euroclear and Clearstream, Luxembourg
and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations
by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility
criteria established by the European Central Bank from time to time.
An investment in the Notes involves certain risks. See "Risk Factors" for a discussion of certain factors that should be considered in connection
with an investment in the Notes.
Joint Lead Managers
BANCA IMI/ PRIVREDNA BANKA
BARCLAYS
DEUTSCHE BANK
ZAGREB
J.P. MORGAN
15 June 2020

- i -

THE REPUBLIC OF CROATIA

- ii -

The Issuer accepts responsibility for the information contained in this Offering Circular. To the best of the
knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the information
contained in this Offering Circular is in accordance with the facts and does not omit anything likely to
affect the import of such information. The Issuer, having made all reasonable enquiries, confirms that this
Offering Circular contains all information with respect to the Issuer and the Notes which is material in the
context of the issue and offering of the Notes, that the information contained in this Offering Circular is
true and accurate in every material respect and is not misleading, that the opinions and intentions
expressed in this Offering Circular are honestly held and that there are no other facts the omission of which
makes misleading any statement herein, whether of fact or opinion.
No person has been authorised in connection with the offering of the Notes to give any information or make
any representation regarding the Issuer or the Notes other than as contained in this Offering Circular. Any
such representation or information should not be relied upon as having been authorised by the Issuer or
any agency thereof or the Joint Lead Managers (as defined under "Subscription and Sale"). Neither the
delivery of this Offering Circular nor any sales made in connection with the issue of the Notes shall, under
any circumstances, constitute a representation that there has been no change in the affairs of the Issuer
since the date hereof.
The Joint Lead Managers make no representation or warranty, express or implied, as to the accuracy or
completeness of the information in this Offering Circular. Each person receiving this Offering Circular
acknowledges that such person has not relied on any Joint Lead Manager or any person affiliated with any
Joint Lead Manager in connection with its investigation of the accuracy of such information or its
investment decision. Each person contemplating making an investment in the Notes must make its own
investigation and analysis of the creditworthiness of the Issuer and its own determination of the suitability
of any such investment, with particular reference to its own investment objectives and experience, and any
other factors which may be relevant to it in connection with such investment.
This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Issuer or any
agency thereof or any Joint Lead Manager to subscribe or purchase, any of the Notes. The distribution of
this Offering Circular and the offering of the Notes in certain jurisdictions may be restricted by law.
Persons into whose possession this Offering Circular comes are required by the Joint Lead Managers to
inform themselves about and to observe any such restrictions. For a description of certain further
restrictions on offers and sales of Notes and distribution of this Offering Circular, see "Subscription and
Sale".
Each potential investor in the Notes must determine the suitability of that investment in light of its own
circumstances. In particular, each potential investor should:
(i)
have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits
and risks of investing in the Notes and the information contained in this Offering Circular or any
applicable supplement;
(ii)
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Notes and the impact the Notes will have on its
overall investment portfolio;
(iii)
have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes,
including where the currency for principal or interest payments is different from the potential
investor's currency;
(iv)
understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant
financial markets; and
(v)
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear the
applicable risks.

- iii -

In this Offering Circular, all references to "HRK" and "kuna" are to the lawful currency for the time being
of the Issuer, all references to "", "EUR", "euro" and "Euro" are to the currency introduced at the start
of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of
the European Union, all references to "U.S. dollars", "US$" and "U.S.$" are to the lawful currency for the
time being of the United States of America and all references to "CHF" or "Swiss franc" are to Swiss
Francs. Certain amounts which appear in this Offering Circular have been subject to rounding
adjustments; accordingly, figures shown as totals may not be an arithmetic aggregation of the figures which
precede them.
IN CONNECTION WITH THE ISSUE OF THE NOTES, J.P. MORGAN SECURITIES PLC AS
STABILISATION MANAGER (THE "STABILISATION MANAGER") (OR PERSONS ACTING ON
BEHALF OF THE STABILISATION MANAGER) MAY OVER-ALLOT NOTES OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A
LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER,
STABILISATION MAY NOT NECESSARILY OCCUR. ANY STABILISATION ACTION MAY
BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE
TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY CEASE AT ANY TIME,
BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF
THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY
STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE
STABILISATION MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILISATION
MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.

- iv -

CONTENTS

Page
THE REPUBLIC OF CROATIA ................................................................................................................. ii
RISK FACTORS .......................................................................................................................................... 1
TERMS AND CONDITIONS OF THE NOTES ....................................................................................... 12
SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM ............... 31
USE OF PROCEEDS ................................................................................................................................. 34
OVERVIEW OF THE REPUBLIC OF CROATIA ................................................................................... 35
THE ECONOMY ....................................................................................................................................... 41
FOREIGN TRADE AND INTERNATIONAL BALANCE OF PAYMENTS ......................................... 61
MONETARY DEVELOPMENTS, INTERNATIONAL RESERVES AND FINANCIAL SYSTEM ..... 77
PUBLIC FINANCE ................................................................................................................................. 105
PUBLIC DEBT ........................................................................................................................................ 129
TAXATION ............................................................................................................................................. 138
SUBSCRIPTION AND SALE ................................................................................................................. 139
GENERAL INFORMATION .................................................................................................................. 141

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RISK FACTORS
Investment in the Notes involves a high degree of risk. Prospective investors should carefully consider the
following risk factors, together with the other information set out in this Offering Circular, before making a
decision to invest in the Notes and should understand that the risks set forth below could, individually or in
the aggregate, have a material adverse effect on Croatia's capacity to repay principal and make payments
of interest on the Notes or otherwise fulfil its obligations under the Notes. Most of these factors are
contingencies which may or may not occur and Croatia is not in a position to express a view on the likelihood
of any such contingency occurring. Additional risks and uncertainties not currently known to Croatia or that
Croatia currently deems to be immaterial may also materially affect Croatia's economy and its ability to
fulfil its obligations under the Notes. In any such case, investors may lose all or part of their investment in
the Notes. Words and expressions defined in "Terms and Conditions of the Notes" or elsewhere in this
Offering Circular have the same meanings in this section.
Risk Factors Relating to Croatia
Having acceded to the European Union ("EU") on the back of a raft of legal, economic, financial and
other reforms and policies, Croatia is undergoing a period of transition which may adversely affect the
Croatian economy and Croatia's ability to repay principal and make payments of interest on the Notes
On 1 July 2013, Croatia joined the EU and became its 28th member state. To facilitate this, the Government
of Croatia (the "Government") introduced structural measures in 2012 and 2013 with the aim of
strengthening the quality of public finances and bringing political, economic and judicial structures in line
with EU requirements.
Croatia has also undergone and continues to undergo changes in legislation due to its EU accession. As a
result, there is a lack of an established practice under many securities, tax and other regulatory regimes in
Croatia and new regulations may be subject to contradictory, ambiguous or changing interpretations by the
Croatian regulatory authorities. Consequently, companies operating in the region may face tax, securities and
other regulatory compliance related risks that may be less predictable than in countries with more stable
regulatory systems.
As a result of EU membership, Croatia may be eligible to receive financial assistance from EU structural
funds pursuant to the EU Cohesion Policy. However, there is no guarantee that Croatia will meet the criteria
to receive disbursements under these funds or that such funds would be available or the timing of any such
disbursements (see "The Economy -- Economic Policy -- EU Structural Funds").
Following accession to the EU, Croatia's economy is exposed to increased competition with other EU
Member States (a "Member State"). As part of its EU accession, Croatia also exited from the Central
European Free Trade Agreement ("CEFTA") - a trade agreement between the non-EU countries in Southeast
Europe, which previously accounted for a significant portion of Croatia's exports, particularly in the
agriculture and food industries. Croatia's trade with its non-EU trade partners now relies on each country's
respective Stabilisation and Association Agreement ("SSA"), which is each such country's bilateral trade
agreement with the EU. Following accession to the EU, Croatia's trade with CEFTA countries declined,
specifically in agro-food exports. In addition, as a result of EU accession Croatia is also required to
significantly reduce the level of domestic subsidies to the agriculture sector (see "The Economy --
Government Subsidies").
Croatia will be eligible to adopt the euro once it fulfils the necessary conditions, and will seek to enter the
Exchange Rate Mechanism ("ERM II"). The procedure is expected to be finalised during the second half of
2020. Under ERM II, the exchange rate of a non-euro area Member State is fixed against the euro and is only
allowed to fluctuate within set limits. Entry into ERM II is based on an agreement between the ministers and
central bank governors of the non-euro area Member State and the euro area Member States, and the European
Central Bank (the "ECB"). Entry into ERM II will be a step towards the full adoption of the euro in Croatia,
in line with Croatia's commitment pursuant to the treaty for Croatia's accession into the EU (the "Accession
Treaty"). On 27 May 2019, the Republic of Croatia submitted a request to the ECB for the establishment of
a close cooperation between the ECB and the Croatian National Bank in the exercise of supervisory tasks
over credit institutions within the Single Supervisory Mechanism ("SSM"). On 4 July 2019, the Republic of
Croatia sent a letter of intent to the euro area member states, Denmark and EU institutions expressing its
intent to enter the ERM II. This marked the first formal step towards the Republic of Croatia's joining the
ERM II, which precedes the introduction of the euro as a country's official currency. The letter of intent was

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accompanied by an Action Plan detailing the reforms that the Republic of Croatia will implement before
entering the ERM II (the "Action Plan"). The Republic of Croatia successfully passed and implemented the
agreed measures from the Action Plan and will formally inform the institutions and the ERM II parties by
submitting its final report on implementation in June 2020. The Republic of Croatia intends to concurrently
enter into a close cooperation with the ECB and into the ERM II, although no assurance can be made
regarding the timing and conditions of Croatia's entry in to the ERM II. Croatia's date of entry into ERM II
and, subsequently, into the eurozone, will primarily depend on Croatia's macroeconomic indicators, i.e. its
ability to fulfil a set of membership criteria which are more stringent than those applied to previous
candidates. The policy measures required to meet such criteria, Croatia's entry into ERM II and adoption of
the euro could each result in adverse macroeconomic effects on Croatia's economy and lead to lower rates
of, or negative, economic growth.
Croatia's economy remains vulnerable to external shocks and internal economic challenges which could
have an adverse effect on Croatia's economic growth and its ability to service its public debt
Croatia's economy remains vulnerable to external shocks, including the impact of the Coronavirus pandemic,
see "-- Croatia's economy remains vulnerable to both internal and external economic shocks as a result of
the global Coronavirus pandemic", which negatively affected the Croatian economy, and the ongoing
political turmoil in certain emerging markets as well as the continuing uncertainty regarding certain Member
States.
As a result of the ongoing hostilities between Russia and Ukraine, which commenced in 2014, the EU and the
United States have supported Ukraine and imposed trade restrictions and sanctions which continue to be in
effect on certain persons and entities affiliated with Russia as well as on certain key sectors of the Russian
economy. The restriction on EU exports of agricultural and food products to Russia have to date had a limited
effect on Croatia. Nonetheless, the potential repercussions surrounding the situation are unknown. The
emergence of new or escalated tensions in the region, or the imposition of further economic or other sanctions
in response to such tensions, which may include targeted sanctions against certain industries, could negatively
affect other economies in the region and the eurozone in general. Although Ukraine is not a material trading
partner for Croatia, any contingent and ongoing escalation of the current tension in Ukraine may in turn have
negative economic and geopolitical consequences for Europe as a whole and indirectly impact Croatia through
its trading partners Austria and Germany and in turn impact the Croatian economy. Further, Croatia could be
adversely affected by rising tensions in the EU and a subsequent slowdown in the EU economy as Croatia has
various trade linkages within the EU (See "Foreign Trade and International Balance of Payments
Geographical Distribution of Croatia's Trade in Goods").
Croatia continues to face a number of economic challenges including low worker participation and
deleveraging of the private sector. There can be no assurance that Croatia will return to the growth pattern
experienced in the period from 2001 to 2008 given that it relied heavily on substantial inflows of foreign
capital during this period. Even if the global economy recovers in the future following the Coronavirus
pandemic, the recovery may not be sustained and may reverse. Unfavourable demographic trends (i.e. ageing
population, emigration of skilled workers and/or declining workforce) could have negative implications for
economic growth and fiscal policy. This could have a material adverse effect on Croatia's ability to repay
principal and make payments of interest on the Notes and on Croatia's credit rating.
Croatia's economy remains vulnerable to both internal and external economic shocks as a result of the
global Coronavirus pandemic
Since the beginning of 2020, the ongoing Coronavirus outbreak, also known as COVID-19, has escalated
into a global pandemic resulting in the implementation of stringent travel and transport restrictions,
quarantines and extended shutdowns of certain businesses globally, including in Croatia, in an attempt to
contain the continued spread of the virus. On 11 March 2020, the Government declared an extraordinary
epidemic "state of emergency" due to the Coronavirus outbreak (the "State of Emergency"). On 19 March
2020, the Government made a decision to implement strict measures in an attempt to stay ahead of the spread
of the Coronavirus including: instituting restrictions on social gatherings and work in trade and service
activities, including food and beverage service activities, temporarily halting border crossing for the Republic
of Croatia; cancelling all sporting, cultural and other large public events; and the closing all educational
institutions, sport facilities recreational areas and children's activity centres. The duration of these health
measures is dependent upon the effectiveness and efficiency of coping with the current situation both
domestically and internationally.

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The Coronavirus pandemic is assumed to reach its first peak in the second quarter of 2020 with the economic
activity to start a gradual recovery thereafter. Therefore, the country's real gross domestic product ("GDP")
is expected to decline by 9.4 per cent. in 2020, a decline of 11.9 percentage points from the pre-crisis GDP
estimate. Domestic demand is expected to decline by 5.2 per cent. during 2020, as social distancing and
increased unemployment will lead to a drop in private consumption, while the increased uncertainty will
result in lower private investment. The external sector contribution to GDP will be negative as lower external
demand, global supply chain disruptions and restricted international travel is expected to lead to a decline in
the export of goods and services by approximately 29 per cent. in 2020. It is expected that the accommodation
and food service activities, the arts, entertainment and recreation and the transport sector will be the economic
sectors most directly impacted by the state of emergency measures as a result of a decrease in demand.
As noted above, although the Coronavirus pandemic is assumed to reach its first peak in the second quarter
of 2020, with economic activity expected to commence a gradual recovery thereafter, the restrictive travel
and quarantine measures currently in place globally may continue to have an adverse effect on Croatia's
tourism sector beyond the expiration of said measures. While the Government has implemented numerous
measures to address the impact of the Coronavirus pandemic on the country's tourism industry, there is no
guarantee that the Government's measures will be effective or that tourists will return in similar numbers
compared to before the pandemic. For more information, see "The Economy Coronavirus Measures to
assist the economy due to the Coronavirus pandemic". The reduction in tourism has had a materially negative
effect on the financial condition of Croatia, and a sustained gap in tourism may increase this effect or delay
Croatia's recovery. Moreover, no assurance can be made as to the negative impacts of a second wave, whether
in Croatia or globally and the ongoing impact remains highly uncertain.
In addition, the Coronavirus pandemic is expected to impact the labour market, especially in the second and
third quarters of 2020. The number of employed is estimated to decrease in 2020, and the unemployment rate
to reach 9.5 per cent. as compared to 6.6 per cent. in 2019. Employers are expected to adjust to the lower
economic activity through reduction of workers or a reduction in hours for workers. These outcomes could
result in lower revenues from social security contributions and higher expenditure on social security benefits.
Even with the Government's preventative measures to mitigate the potential economic impact of the
Coronavirus pandemic, the Coronavirus pandemic could have an adverse effect on the funds available to
social security and healthcare services in Croatia in the future.
On 17 March 2020 and 2 April 2020, the Government adopted two comprehensive and targeted packages of
economic measures to mitigate the Coronavirus pandemic's negative impact on economic activity. The goal
of these measures was to help the private sector, as the bearer of economic activity, to overcome the crisis
through job preservation and payment of salaries and to solve the liquidity problems of those business
activities, which have been reduced by the Coronavirus pandemic. For more information on these measures
and policies see "The Economy Coronavirus Measures to assist the economy due to the Coronavirus
pandemic". The combined impact of the slowdown in economic activity and the cost of such measures has
had a material negative impact on the Government's budget. As a result of the Coronavirus pandemic,
Government expenditures increased significantly while budget revenues decreased, resulting in the
Government's need to amend the initial 2020 State Budget in May 2020. For more information see, "The
Economy Functioning of the public finance system and the sustainability of public services financing". As
a result, Croatia's deficit is expected to increase in 2020, requiring both reductions in other spending and
external financing. Moreover, the debt/GDP ratio is expected to rise to 86.7 per cent. in 2020. In addition,
the Croatian National Bank ("CNB") implemented, within its mandate, numerous measures aimed at both
preserving the stability of the banking system and strengthening its flexibility to reduce the adverse effects
on households and companies from the restrictions caused by the pandemic. No assurance may be given that
the Government's deficit and public debt will not increase more than expected, on the availability of external
financing and the terms of such financing or that the Government's measures will be sufficient to limit the
negative economic effects of the Coronavirus pandemic and, after its end, to put Croatia's economy on a path
to recovery, which in turn may have a negative effect on the financial condition of the Issuer.
Accordingly, Croatia's economy and its capacity to repay principal and/or interest on the Notes may be
adversely affected as a result of issues arising from the ongoing Coronavirus pandemic, including the impact
on Croatia's public finances or linked to an economic slowdown in the Eurozone or owing to a prolonged
recession or depression in the global economy.

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The uncertainties surrounding the fallout from Agrokor could have a material adverse effect on Croatia's
economic performance
In 2013, Croatia's privately held food and retail group Agrokor, acquired Mercator (a Slovenian retail
company), creating one of the largest food and retail businesses in central and eastern Europe. During this
acquisition, Agrokor amassed significant debts to its creditors and suppliers, resulting in the need for
increased liquidity from banks and bondholders.
Over-expansion backed by high leverage, led to an immediate need for a cash injection. In January 2017,
Agrokor was unable to refinance and rating agencies downgraded its debt.
Subsequently, Agrokor (together with other companies from the Agrokor group) became subject to the newly
passed Act on Emergency Administration in Companies of Systemic Importance for the Republic of Croatia
(OG 32/2017) that entered into force on 7 April 2017 and created a form of bankruptcy protection for systemic
enterprises allowing for the procedure of extraordinary administration in companies that independently or
together with their affiliates cumulatively fulfil the following conditions: (i) employ more than 5,000
employees in average in the calendar year preceding the year in which the application for opening the
extraordinary administration procedure was submitted and (ii) whose liabilities amount to more than 7.5
billion kuna on the day of the submission of the application for opening the extraordinary administration
procedure.
Due to the financial situation of Agrokor, the CNB asked banks to provision their Agrokor exposure by at
least 50 per cent., impacting banks' profitability and reducing capital outflows in the form of profit dividends
to their parents in 2017. Recent improvements in Croatia's banking sector including recovering profitability,
increased lending and declining nonperforming loans could be impacted by Agrokor's financial stress.
However, due to the banks' higher capitalisation levels they are better placed to withstand such an impact.
Further, Agrokor's direct liabilities are mostly towards foreign banks and should therefore not affect the
stability of the Croatian banking system.
Pursuant to the Act on Emergency Administration in Companies of Systemic Importance for the Republic of
Croatia, Agrokor's outstanding debt obligations as of 9 April 2017 were frozen, interest accrual was
discontinued and a 15-month period was set to satisfy the debt obligations. The settlement deal has now
received majority lender consent. Restructuring efforts at Agrokor are underway and the potential fallout from
the situation around Agrokor remains contained. Aside from a small dent in consumer confidence in the
immediate aftermath of the Government installing an extraordinary commissioner at Agrokor, investments and
consumption have held up over the course of 2017, 2018, and 2019. However, the uncertainties surrounding the
fallout from Agrokor and the restructuring process could increase the vulnerability of the banking sector and
could also have a negative effect on the economy and thus on the ability of Croatia to repay principal and make
payments of interest on the Notes.
Depreciation in the kuna may adversely affect the Croatian economic and financial condition
A significant portion (approximately 75 per cent.) of Croatia's public external debt and domestic debt is
denominated in or linked to foreign currencies. In addition, government guarantees are denominated in or linked
to foreign currency. In the event of foreign currency fluctuations, and a depreciation of the kuna relative to the
U.S. dollar, the euro or the Swiss franc, the negative impact on the service obligations in respect of the debt
denominated in foreign currencies will likely not be offset by any positive impact on the service obligations in
respect of debt denominated in kuna. Any significant depreciation of the kuna may have an adverse effect on
the Republic's ability to repay its debt denominated in foreign currencies, including the amounts due under the
Notes. The CNB has intervened in the foreign currency as part of its policy of pursuing a stable euro/kuna
exchange rate, including in the first half of 2020 as a result of depreciation during volatile market conditions
resulting from the Coronavirus pandemic. The depreciation of the kuna against foreign currencies may
negatively affect the capacity of corporate and household borrowers to repay their debt and as a result adversely
affect the financial and economic condition of Croatia. (See "Monetary Developments, International Reserves
and Financial System -- Monetary Policy and Instruments").
The further proliferation of the euro in the Croatian economy may adversely affect the CNB's ability to
implement its monetary policies
In recent years, the role of the euro in the Croatian economy and circulation of the euro in Croatia
substantially increased as a result of sizeable euro capital inflows from abroad, including from persons

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working abroad who send money to their families in Croatia; the tourism industry, in particular the
population's willingness to accept euro from tourists; and the fact that a majority of corporate and household
loans are euro-denominated or euro-indexed. As the Government's domestic monetary policy mostly impacts
the kuna and has limited impact on other currencies including the euro, the further proliferation of the euro
in the Croatian economy and widespread use of euro by the population may undermine the ability of the CNB
to implement its monetary policies. Similarly, the policies of the ECB affecting the euro are likely to
indirectly impact the Croatian economy. Any limitations on the ability of the CNB to implement its monetary
policies may have an adverse effect on the Croatian economy and thus on the ability of Croatia to repay
principal and make payments of interest on the Notes.
The current account balance may deteriorate
Croatia's current account deficit has declined gradually since 2008 and recorded surpluses in each year since
2014, although this is likely to reverse owing to the Coronavirus pandemic in 2020. Nevertheless, as a small,
open economy, Croatia's current account balance is significantly affected by its trade balance and any future
negative changes in the trade balance and the current account balance could have an adverse effect on the
Croatian economy and thus on the ability of Croatia to repay principal and make payments of interest on the
Notes.
If Government revenue decreases, some or all of the Government's expenditure reduction plans prove
insufficient or additional spending is required, and state-owned enterprises' dependence on public
finances is not reduced, Croatia may not be able to service its public debt and, as a result, to repay principal
and make payments of interest on the Notes
Without an on-going and sufficient structural reforms aimed at reducing the dependence of state-owned
enterprises on public finances and at fostering greater economic efficiency through broader private sector
participation, revenue raising measures could prove inadequate. The Government's ability to make payments
may become further affected by economic cyclical trends. Lower than expected growth would have a negative
impact on budget revenue and would increase the Government deficit with resulting negative implications as
a result of the Coronavirus pandemic, as well as the earthquake in Zagreb in 2020, Government expenditures
increased significantly and revenues decreased requiring a revised Budget, see "The Economy Functioning
of the public finance system and the sustainability of public services financing". Moreover, as noted above
demographic trends, including an ageing population, are likely to limit the ability of the Croatian government
to reduce expenditures.
Taken as a whole, reduced revenue, coupled with high expenses related to public wages, social benefits,
interest payments, healthcare system, pensions and subsidies, may adversely affect Croatia's ability to repay
principal and make payments of interest on the Notes.
There can be no assurance that Croatia's credit ratings will not change
The long term foreign and domestic currency debt of the Republic is currently rated BBB- (stable outlook)
by S&P and Ba2 (positive outlook) by Moody's and BBB- (stable outlook) by Fitch. There can be no
guarantee that the Republic will not experience credit downgrades or negative revisions to the outlook.
Deterioration in key economic indicators or the materialisation of any of the risks discussed herein may
contribute to credit rating downgrades. Any adverse changes in an applicable credit rating or credit rating
outlook could adversely affect the trading price for the Notes. In addition, negative ratings action could
adversely affect Croatia's ability to refinance existing indebtedness or finance its deficit and could affect
payment of principal and interest under the Notes.
As at the date of this Offering Circular, S&P and Fitch are established in the European Union and are
registered under Regulation (EU) No 1060/2009 (as amended) (the "CRA Regulation"). Moody's is not
established in the European Economic Area ("EEA") but the rating it has given to the Notes is endorsed by
Moody's Investors Service, Ltd, which is established in the EEA and registered under the CRA Regulation.
A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension,
reduction or withdrawal at any time by the assigning rating agency.
Croatia may not be able to refinance its debt on favourable terms or at all
Croatia has substantial amounts of internal and external public debt. As at 31 December 2019, general
Government debt stood at HRK 293.0 billion (73.2 per cent. of GDP) and Government guarantees stood at
HRK 4.4 billion (1.1 per cent. of GDP), for a total amount of HRK 297.4 billion or 74.3 per cent. of GDP

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