Fitch cuts Croatia to junk

By bne IntelliNews September 23, 2013

bne -

Croatia had its credit rating cut to junk by Fitch Ratings on September 20, on the back of what the ratings agency called a deterioration in the newest EU member's fiscal outlook.

Fitch said that it has lowered the country's long-term foreign-currency debt assessment to 'BB+', one level below investment grade, from 'BBB-', and its local currency rating to 'BBB-' from 'BBB'. The outlook on the ratings is stable.

The move leaves Croatia on a par with Portugal and Hungary at Fitch. It also sees the agency join Standard & Poor's and Moody's Investors Service, which have already cut the country to below investment grade.

"A structurally weak growth outlook has impaired the prospects for fiscal consolidation and the attainment of public debt sustainability," Fitch said. "Measures to clamp down on tax evasion and improve compliance have borne fruit, but revenues have fallen this year, whilst pressures continue to build on the expenditure side."

Croatia, which became the EU's 28th member in July, is struggling to keep public finances in check after the economy shrank more than 10% since 2008, during which time foreign direct investment plunged 80%, according to Bloomberg. GDP will fall 0.9% in 2013, Fitch predicts, lowering its previous forecast of 0.3%.

Tim Ash of Standard Bank notes this is clearly disappointing for Croatia, but not unexpected given the other rating agencies' stances. "Fitch indicated that this move was primarily driven by disappointment in the fiscal side, revising their forecast for the budget deficit from 3.9% of GDP to 4.7% this year, and the ratio of general government debt to 66% of GDP now by 2016 (previous 62% forecast)."

"While the budget deficit is still higher than Hungary, the ratio of public sector debt is still a good 10-15% lower than Hungary," he writes. "Croatia's problem - actually like Hungary, and the region - is still growth, with the economy still mired in recession, and Fitch now forecasting a further 0.9% contraction this year."

Related Articles

Macedonia kept on hold as Balkans edges towards EU goal

Clare Nuttall in Bucharest -   Macedonia’s EU accession progress remains stalled amid the country’s worst political crisis in 14 years, while most countries in the Southeast Europe region have ... more

Ruling SDP loses Croatia election but opposition HDZ fails to win it

Andrew MacDowall in Zagreb - Croatia’s conservative opposition has eked out a narrow victory in parliamentary elections on November 8, but having fallen well short of a majority after running a ... more

Croatia's HDZ takes lead in general election

bne IntelliNews -   Croatia’s opposition Patriotic Coalition, led by the Croatian Democrat Union (HDZ), looks to have won the general election, but the new government will be decided by the ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Notice: Undefined index: subject_id in /var/www/html/application/controllers/IndexController.php on line 296
Dismiss