Moodyʼs Investors Service revised Croatiaʼs sovereign credit rating to ʼBa1ʼ from ʼBa2ʼ and changed the outlook to stable from positive, citing enhanced institutional capacity and policymaking as the country enters a critical phase of euro area accession and reduced exposure to foreign-currency debt risk.
In July, amid the coronavirus disruption, Croatia was admitted into the EUʼs Exchange Rate Mechanism II (ERM II), one of the final steps prior to becoming a member of the euro area, thanks to its comprehensive reform program.
"Moodyʼs believes that Croatiaʼs policy effectiveness has strengthened over the recent years. The government and the central bank have provided a more predictable and stable framework for economic activity in a very uncertain environment. The policy response to mitigate the impact of the coronavirus pandemic has been timely and efficient," the credit agency said in a report.
Moodyʼs said it expects Croatia to continue to pursue sound economic and financial policies, as entering the euro area will require both sustainable economic convergence and readiness to participate in the banking union. Standard & Poorʼs credit rating for Croatia stands at ʼBBB- with stable outlook. Fitchʼs credit rating for Croatia was last reported at BBB- with stable outlook.