"Moody's decision to change the outlook to positive is driven by an increasing likelihood that Croatia's debt burden will fall more significantly than previously expected leading to further improvements in fiscal strength," it said on Friday evening.
The upgrade is also supported by the potential for Croatia's growth and improved institutional effectiveness. This is due to the successful implementation of significant investments and reforms outlined in the EU-sponsored Croatia's Recovery and Resilience Plan (RRP).
The affirmation of the Baa2 ratings reflects Croatia's fiscal strength, as well as institutions and governance strength that are significantly stronger than that of rating peers, Moody's said. The ratings agency expects that Croatia's debt burden will stand at 61.1% of GDP by the end of 2023, and will continue to decline to 58.3% in 2024 and 56.3% in 2025.
The projected decline of the debt-to-GDP ratio remains significantly faster and deeper than Moody's previous expectations.
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