Fitch Rating Stable

The Fitch Ratings agency has published its revised credit rating assessment for Croatia and has changed its prognosis from negative to stable, retaining Croatia’s long-term rating of BBB- (foreign currency) and BBB (local currency).  The outlook revision reflects the Croatian Government’s mid-term plans for fiscal consolidation, including improvement of tax collection measures.  The Fitch revision confirms the continued need to reduce the government deficit and considers that the government is on track to meet the 2012 deficit target of 3.8% of GDP, down from 5% in 2011.  In order to continue to retain this rating, Fitch emphasizes the need to continue with long-term fiscal and public spending reforms.  Economic experts consider the Fitch revision as a reprieve to allow for continued needed reforms.  The Fitch rating resulted in an increase in value of Croatian bonds globally and interest rates on state debts minimally reduced.  Meeting its budget deficit targets, stabilisation of the public debt ratios and maintaining a sustainable GDP growth rate will determine whether Croatia will retain its stable rating in the future.  Fitch recognizes the Government’s efforts in making the public labour market more flexible, but considers the low labour participation rate in the country a concern.  In the upcoming weeks, Croatia is also expecting revised ratings assessments from the Moody’s and Standard & Poor’s rating agencies.