S&P upgrades Croatia’s rating

Standard & Poors upgraded Croatias rating to A- from BBB+ on September 13, which is the highest rating the country has ever received. More importantly, the outlook remains positive, suggesting that Croatia may see further rating advancements within the next two years. The progress is remarkable, with a five notch upgrade in the last seven years. The agency mostly refers to the successful integration of the country as the main reason behind the outlook change. According to the statement, Croatia's reforms are seen as a key driver for enhancing the country's economic growth potential by diversifying the economy and boosting productivity. The economy is expected to grow at an average rate of 3% between 2024 and 2027, keeping the country on a steady convergence path. Fading external risks and fiscal diligence were cited as positive factors. Croatia's ratings could be raised if the country's external position improves significantly and/or reforms that boost economic competitiveness and productivity could lead to a more diversified economy, reducing reliance on tourism. The positive outlook should motivate a diligent policy course, but also provides support to the spread levels in the high-double-digit region going forward (although, immediate market reaction is not expected). The upgrade decision comes shortly before the Fitch ratings assessment due on September 20 after the market closes.