The Fitch Ratings agency has upgraded Croatia’s credit rating by one notch, from ‘BBB-‘ to ‘BBB’, citing a positive outlook. This is the best rating in Croatia’s history.
“Fitch expects Croatia to be in a position to join the euro in January 2023 due to its significant progress in meeting convergence and structural reform criteria, despite the pandemic shock, and political support at the wider eurozone level for Croatia’s membership,” the agency said in a report.
“Euro adoption is supportive of the rating, as it would provide the sovereign with reserve currency status, reduce transaction costs and limit exchange rate risk to corporate and household balance sheets,” it added.
The agency noted that Croatia’s rating is supported by strong structural features, including higher human development and governance indicators than peers, anchored by EU membership, a GDP per capita around 40% higher than the ‘BBB’ median, and lower and less volatile inflation.
Set against these factors are high public sector debt, an adverse demographic profile, and a record of low GDP growth, partly due to the slow adoption of structural reforms in the past.
“Croatia’s growth performance has been much stronger than we previously expected, thanks to better performance of the tourism sector and ongoing resilience of the export sector,” Fitch said.
Prime Minister Andrej Plenković said Croatia’s likely entry into the euro area in 2023 was a signal and message to the investment community that the government’s economic and fiscal policies were correct.
(Željko Trkanjec | EURACTIV.hr)