March 26 (SeeNews) - Erste Group said on Monday it expects a limited market reaction to S&P's decision to lift Croatia one notch to 'BB+' with stable outlook, as investors have been pricing in rating upgrade for some time now.
On Friday, S&P said it upgraded Croatia to 'BB+' on the back of strong fiscal performance and diminishing external imbalances.
Erste Group said in a short note on Croatia that it expects Moody's to align with Fitch and S&P, after the ratings agency recently decided to opt for a wait-and-see approach.
The banking group also said that growth-enhancing reforms and ongoing fiscal prudence remain key shaping factors as far as rating prospects are concerned.
"The S&P move was expected and the rhetoric offered no surprises, as rating agencies shift their focus more to low-potential GDP growth rates and demand more action on that front, consequently to mitigate fiscal risks down the road," Erste said. "We expect Moody's to align with Fitch and S&P, followed by a wait-and-see approach until Croatia delivers more on the mentioned key items."
In January, Fitch upgraded Croatia's long-term foreign- and local-currency issuer default ratings (IDRs) to 'BB+' from 'BB', with a stable outlook.
Croatia's credit ratings were mostly kept unchanged last year, as the crisis in its biggest private concern Agrokor unfolded.