HR: Moody’s delivers long-awaited upgrade

While an upgrade from Moody's has been largely anticipated, the decision to bump up Croatia's rating by two notches delivers a strong tone from the rating agency, which is known for its more cautious view on Croatia's rating prospects. Croatia is now rated 'A3' by Moody's, with the outlook being tuned down to 'stable', thus aligning with both S&P and Fitch (S&P being the only rating agency with a positive outlook). The rationale behind this decision brings limited surprise, with strong economic and fiscal performance backing the move.

As far as rating actions are concerned, this wraps up 2024. While benevolent wordings from rating agencies suggest that there may still be room for improvement, our baseline scenario for 2025 is a wait-and-see mode, yet risks are tilted to the upside. With markets already pricing in positive 2H24 rating news flow, the strong call from Moody's should bode well with investors and provide further anchoring in the current turbulent market environment.