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Croatia Rating Raised by Moody’s Following S&P, Fitch Upgrades

Pedestrians in Ban Jelacic Square in Zagreb, Croatia, on Monday, Jan. 2, 2023. Croatia joined the euro zone and the European Union's visa-free travel area on Jan. 1, completing its journey from the war-torn Balkans to the European mainstream. Photographer: Petar Santini/Bloomberg (Petar Santini/Bloomberg)

(Bloomberg) -- Croatia’s long-term credit score was raised two levels by Moody’s Ratings, which cited prospects for strong economic growth and sustainable fiscal policies.

Moody’s moved the sovereign rating to A3 from Baa2, according to a statement published late Friday. The outlook was changed to stable from positive.

“Croatia’s fiscal strength will remain materially higher in the near to medium term, due most notably to a sharp reduction of the government debt burden that is unlikely to reverse,” the credit rating company said in the statement.

Moody’s also cited “a continued improvement” of economic strength, driven by structural reforms and an increase in labor immigration that both support long-term growth potential.

Croatia’s government bonds rallied in September when Fitch Ratings and S&P Global Ratings both raised the sovereign-debt credit rating to A-, though yields have rebounded recently. 

The euro area’s newest member has pushed its budget gap to less than 3% of gross domestic product and expects to lower public debt levels below 60% of GDP by the end of the year. 

“The fiscal strength of Croatia has improved markedly in recent years, driven primarily by a very significant decline in the government debt burden,” Moody’s said.

This story was produced with the assistance of Bloomberg Automation.

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