Fitch Ratings on Friday affirmed Croatia’s rating at ‘BBB-‘, with a stable outlook, highlighting big short-term risks related to the pandemic as well as the medium-term outlook for economic growth thanks to the EU’s financial support.
The ‘BBB-‘ rating balances strong structural features, the agency says, singling out better indicators of human development and governance in comparison with countries with a similar rating and higher GDP per capita.
The stable outlook “weighs large short-term downside risks related to pandemic developments against stronger medium-term growth prospects linked to substantial EU fund support and our fiscal consolidation and debt reduction baseline that is underpinned by the authorities’ commitment to fulfilling convergence criteria under the Exchange Rate Mechanism (ERMII).”
Fitch forecasts GDP growth to accelerate to 6.1% in 2022 before averaging 4% in 2023-25, driven largely by investment and notes that Croatia will receive around €6.3 billion in grants from the Recovery and Resilience Facility (RRF).
The agency’s emphasis is on the process of joining the Economic and Monetary Union. Fitch raised the public deficit forecast from 3.5 to 4% of GDP in 2021 and forecasts a fall to 3% in 2022, up by 0.8 percentage points from the forecast made last December. Public debt/GDP should fall to 82.7% of GDP in 2022 from 88.7% in 2020, Fitch said, forecasting Croatia’s eurozone entry for 2024.
