MUMBAI (Thomson Financial) - Fitch Ratings said it has affirmed its 'BBB-' long-term foreign currency issuer default rating (IDR) on the Republic of Croatia and long-term local currency IDR at 'BBB+' with a stable outlook.

'Croatia's ratings reflect a balance between the credit strengths provided by the economy's high income level relative to ratings peers and weaknesses related to the slow pace of structural, fiscal reforms and the economy's relatively high external debt ratios,' the director of Fitch's sovereign team, David Heslam, said.

However, Fitch said these strengths need to be balanced against Croatia's relatively large and growing external indebtedness, which has been driven by a current account deficit that has exceeded 7 pct of GDP since 2001 and borrowing abroad by the private sector.

On many international comparisons of its business environment, Croatia compares poorly, with weaknesses related to the large public sector and inefficiencies in public administration, Fitch said.

The agency has also affirmed Croatia's Short-term foreign currency IDR at 'F3' and Country Ceiling at 'BBB+'.

The agency said a convincing reform momentum, combined with measures to streamline the public administration and narrow the government deficit, would increase the positive pressure on Croatia's ratings.

 

AFX News Limited

08.28.07, 12:40 PM ET

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