The Fitch credit agency reiterated at a teleconference on Monday that the state budget for 2013, had lessened the Croatian government's credibility of its medium-term fiscal consolidation plan, after this global credit ratings provider last week lowered Croatia's outlook from stable to negative, ascribing the new rating outlook to the slower consolidation of the state budget. Last Thursday, the rating agency also affirmed the country’s Long-term foreign-currency Issuer Default Rating (IDR) at 'BBB-' and Long-term local currency IDR at 'BBB'.
Croatia’s credit rating is well-supported after Fitch Ratings cut its outlook to negative from stable over the government’s forecast for a wider budget gap next year, Michele Napolitano, an associate director at Fitch’s Emerging Europe Sovereign team in London, said at yesterday's teleconference.
"The rating is underpinned by a number of factors, such as high GDP per capita, low inflation, well-capitalized banks, European Union accession in the near future, and improved government over the last 10 years," he added.
The 2013 budget proposal remains a negative surprise for us, he said, according to an audio recording of the teleconference. The budget disappoints in areas of fiscal credibility, its impact on debt dynamics, and its unexpected increase of expenditures, he added.
He positively reviewed the implementation of the 2012 budget, notably budget revenues, which was the reason why in September Fitch raised Croatia’s outlook to stable from negative, citing the government’s progress in cutting costs and narrowing the budget deficit.
After it stated that it had downgraded Croatia's outlook again to negative last Thursday, Fitch announced a teleconference for the following week, which was held on Monday.
