Croatia Gets Second Investment-Grade Rating as Fitch Follows S&P
Croatia Gets Second Investment-Grade Rating as Fitch Follows S&P
(Bloomberg) -- Fitch Ratings raised Croatia’s credit score to investment-grade level, making it the second major rating company to bring the Adriatic Sea country out of junk-bond status since March.
The sovereign rating was upgraded by one notch to BBB-, with a positive outlook, from BB+, Fitch said on Friday, citing the European Union member’s efforts in lowering public debt, balancing the budget, and improving economic growth. The move puts Croatia on par with Russia and fellow EU member Romania. S&P Global Ratings lifted Croatia to investment-grade status in March, while Moody’s Investors Service rates it at Ba2, with a positive outlook.
“Fitch expects fiscal dynamics to remain on a positive trajectory over the medium term, underpinned by confidence in the authorities’ track record and commitment to continued fiscal consolidation, improvements in the fiscal framework and stable macroeconomic conditions,” it said in a statement.
Croatia has balanced the budget in recent years and slashed public debt faster than prescribed by Maastricht criteria, which Zagreb is trying to fulfill so it can join the euro area in the next decade. The economy is predicted to grow just under 3% this year. The efforts by the government of Prime Minister Andrej Plenkovic have resulted in the country’s emerging out of junk status where it was demoted to in 2012 amid a record recession.
The nation exited the EU’s procedure on excessive economic imbalances in April. Central bank Governor Boris Vujcic said he expects Zagreb to send a letter of intent to join the ERM-2, the euro zone’s waiting room, by July.
Fitch forecast Croatia’s real GDP growth to average 2.4% in 2019-20, lower than the current BBB median of 3.1% but enough to finally return to the pre-crisis output level by 2020. Given modest planned public wage increases over the next two years, Fitch now expects inflation to average only 1% in 2019-20.
Finance Minister Zdravko Maric said in March that the government may hold a roadshow for international bond investors before the summer.
To contact the reporters on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net;Hari Govind in San Francisco at hgovind@bloomberg.net
To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Michael Winfrey, Meghan Genovese
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