PM: Fitch's credit rating upgrade confirms Croatia's good reform direction

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Prime Minister Andrej Plenkovic welcomed Fitch Ratings's decision to raise Croatia’s credit score, saying it was additional confirmation of the government's successful economic and fiscal policy and Croatia's reform direction, the government said in a press release.

Fitch Ratings on Friday upgraded Croatia's long-term foreign-currency issuer default rating to BBB- from BB+ with a positive outlook. The government said "the last time we had this assessment was 14 years ago."

Fitch highlighted outstanding results in the fiscal policy and another budget surplus despite the payment of enforced guarantees for the Uljanik shipyard in the amount of 0.7% of GDP, the government said.

In March, after more than six years, Standard & Poor's restored Croatia's credit score to investment level and this decision by Fitch "confirms that Croatia is going in the right direction, that the government is stable and implementing reforms," Plenkovic said, per the press release.

"I welcome the fact that the Fitch agency has recognised the results of our efforts to maintain macroeconomic stability, implement structural reforms and run public finances responsibly. Especially encouraging is that it underlines that the budget target was again outperformed, that the public debt-to-GDP ratio is strongly decreasing, by three percentage points annually, and that the absorption of European funds is accelerating," Plenkovic said.

The press release said Fitch welcomed the government's preparations for joining the European Exchange Rate Mechanism II as an important step preceding the adoption of the euro as the official currency, as well as the effects of stable and low inflation, to which a reduction in VAT rates for certain items contributed.

"It was assessed that the strong GDP growth of 3.9% in the first quarter of the year removed concerns of a sharper slowdown following weaker demand on our most important export markets. Fitch highlights the extremely positive trend of net external debt reduction and underlines that some structural indicators for Croatia are more favourable than for states whose credit rating was already at BBB level," the government said.

Investment rating is strong message to investors

The government said that Croatia's credit score was raised to investment level over the past three months by two of the world's three rating agencies.

"The country's return to the investment credit rating level is excellent news which supports the government's efforts to establish a more dynamic, stable and sustainable economic growth. That will have a positive impact on Croatia's perception and thereby the possibility of increasing foreign investments as well as the revival of the domestic capital market," the press release said.

For Finance Minister Zdravko Maric, Fitch's decision "is confirmation of the successful implementation of the government's economic policy focused on strengthening investments, implementing structural reforms and pursuing a viable public finance policy," per the press release.

Text: Hina