Croatia remains a risky country for investors, although it will have significant economic benefits from accession to the European Union, the international ratings agency Fitch said on Wednesday, adding the reason was a weak economic growth outlook.
Fitch retained Croatia's credit rating at BBB-, the lowest for investments with a negative outlook, the Wall Street Journal said on its website. Croatia completed EU accession talks last week and is expected to join in July 2013.
Although EU accession will ensure significant advantages for Croatia, the poor dynamic of the debt, the high foreign debt and weak economic growth prospects mean that the credit rating risks remain negative, the agency said.
Croatia is fighting to come out of the recession and reduce the budget deficit, which is predicted at 4.2 per cent of GDP for this year, the economy contracted by 1.2 per cent in 2010 and by 0.8 per cent in the first quarter of this year, and the government is predicting a 1.5 per cent growth in 2011, the WSJ said, adding Croatia remained dependent on the external debt for financing the budget deficit.
EU membership will support Croatia's debt rating by helping to improve the quality of public governance and quality of institutions, it will provide a foothold for fiscal discipline as well as access to additional EU funds and other capital, said Fitch.
To reap all the benefits, Croatia should carry out structural reforms directed at improving the business environment, it added.
According to the EU's current budget, Croatia will receive EUR 1 billion in 2012 and EUR 1.4 billion in 2013. Membership will also encourage foreign investment.
