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Fitch upgrades Croatia to 'BBB', outlook positive

Ratings

Fitch Ratings said it has upgraded Croatia's long-term foreign-currency issuer default rating (IDR) to 'BBB' from 'BBB-, with positive outlook on thanks to the country's prospects to join the eurozone as of 2023.

"Fitch expects Croatia to be in a position to join the euro in January 2023 due to its significant progress in meeting convergence and structural reform criteria, despite the pandemic shock, and political support at the wider eurozone level for Croatia's membership," the rating agency said in a statement.

Euro adoption is supportive of the rating, as it would provide the sovereign with reserve currency status, reduce transaction costs and limit exchange rate risk to corporate and household balance sheets, the statement added.

The positive outlook reflects further upward rating potential from the direct positive impact that euro adoption would have on the sovereign rating model output, mainly through reserve currency flexibility. 

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