Fitch upgrades Croatia rating outlook on lower budget deficit

Rating agency Fitch has upgraded Croatia's rating outlook from negative to stable, while keeping short-term and long-term credit ratings unchanged.

The revision of the outlook was based on the fact that Croatia's budget deficit narrowed to an estimated 1.8 percent of its GDP in 2016, lower than initial prediction of 2.6 percent, according to Fitch.

In addition, the political risks has reduced after new government was in power in October 2016, it added.

Croatia's long-term credit rating remained at "BB" and short-term credit rating "B".

Croatia's ratings balance strong structural features, including human development and governance indicators, with weak growth potential, high public and private debt and external vulnerabilities, Fitch said.

Croatia's economic growth was estimated at 2.8 percent in 2016, reflecting better EU fund absorption and a record tourism season, growth in goods exports as well, Fitch said.

For 2017, the economy is expected to rise by 2.5 percent to 3 percent.

However, Fitch warned that a reversal of fiscal consolidation, leading to unfavorable public debt dynamics and a deterioration in growth prospects, could trigger negative rating action.

Last December, another rating agency Standard & Poor's has also upgraded its outlook on Croatia from negative to stable. Endit