This U.S. credit agency stated that Croatia's Long-Term Foreign-Currency Issuer Default Rating (IDR) has risen by a notch to 'BBB' from 'BBB-'.
Fitch expects "Croatia to be in a position to join the euro in January 2023 due to its significant progress in meeting convergence and structural reform criteria, despite the pandemic shock, and political support at the wider eurozone level for Croatia's membership."
The euro adoption will support Croatia's rating, "as it would provide the sovereign with reserve currency status, reduce transaction costs and limit exchange rate risk to corporate and household balance sheets."
"The Positive Outlook reflects further upward rating potential from the direct positive impact that euro adoption would have on the Sovereign Rating Model output, mainly through reserve currency flexibility."
The agency says that the country's growth performance has been much stronger than it previously expected, "thanks to better performance of the tourism sector and ongoing resilience of the export sector".
The agency forecasts "sustained economic momentum in 2022-2023 with GDP growth averaging 4%, broadly in line with 'BBB' peers, despite some persistent short-term risks related to renewed pandemic-related challenges and the potential adverse effects of higher energy costs on the corporate sector."
The public debt to GDP ratio is likely to fall by about three percentage points annually from 2021 to 2023 to 77.9% of GDP.