February 6 (SeeNews) - Erste Research said on Monday that Slovenia is likely to get a credit rating upgrade this year, whereas Croatia and Serbia would see positive changes in their rating outlook.
Fitch ratings agency is expected to change its rating outlook on Slovenia and Serbia to positive from stable, while Moody’s is seen upgrading its rating outlook on Croatia to neutral from negative, Erste Research said in a regional report.
The solid and stable economic performance and expected gradual acceleration of growth, positive fiscal developments and stabilisation of the banking sector make Slovenia a solid candidate for the 'awards' from the rating agencies, the analysts commented.
"We could see a positive move from Moody’s, which holds Slovenia at Baa3 (below the comparable rating of the other two agencies), and Fitch aligning with other agencies by increasing the outlook from stable to positive," Erste added.
For Croatia the analysts expect an outlook upgrade by Moody's, following S&P’s revised outlook at the very end of last year and Fitch's outlook upgrade to ‘stable’.
"Moody’s should be next in line with its assessment during 1Q17; we see room for an upgrade on the outlook side as well, given that Moody’s currently has it at ‘negative’," Erste said.
Looking ahead, the lender noted that Croatia's healthier fundamental picture favours a more optimistic view regarding the rating agencies' stance.
Stronger growth momentum, an improving fiscal position and restored stability have laid solid ground for a continuation of the positive rating news flow throughout this year, Erste said. "In our baseline scenario, we expect to see at least the outlook further improving to ‘positive’, while we would not rule out an upgrade by a notch by some of the rating agencies".
Serbia's better-than-expected economic performance in 2016 and significant improvement in the fiscal position suggest that positive tones from the rating agencies should also be seen in this country, according to the analysts.
"Primarily, we expect that Fitch could raise its outlook from stable to positive already in the first assessment in June, aligning with the other agencies," Erste said. "As for the hikes in ratings, we expect the agencies to take a cautious stance and monitor the performance of the Serbian government till the end of the year, as they will await the election results (potential snap elections as well), while some structural reforms are still lagging behind."
If the government shows progress on the reform agenda and the political situation does not bring any uncertainties, Erste said it could see a potential one-notch upgrade in rating from Moody’s or S&P in November or December.
Erste added it does not expect any negative action for Romania unless it sees evidence that fiscal loosening is translating into a much wider current account deficit.