Fitch lifts Croatia to stable

Fitch Ratings said it revised the outlook on Croatia's long-term foreign- and local-currency issuer default ratings to stable from negative and affirmed the issuer default ratings at BB.

The country ceiling affirmed at BBB- and short-term foreign-currency and local-currency issuer default ratings at B.

The issue ratings on Croatia's senior unsecured foreign- and local-currency bonds were affirmed at BB and its senior unsecured short-term rating was affirmed at B.

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

The outlook revision reflects the company’s budget deficit, which narrowed to an estimated 1.8% of GDP in 2016, much lower than envisaged under the initial budget (2.6%) and narrower than the BB median, the agency said.

Part of the improvement is cyclical, reflecting outperforming growth-induced revenues and under-performance of capital spending, Fitch said.

However, the nominal freeze in spending throughout the year also helped contain the deficit, the agency added.

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