March 10 (SeeNews) - Croatia's unit of Raiffeisen Bank said on Friday that it expects Moody's to change its outlook on Croatia from negative to stable on the back of strengthening economic growth and debt reduction progress.
In March 2016, Moody's brought Croatia's rating down from Ba1 to Ba2 with a negative outlook.
"After one year has relapsed Croatia has demonstrated enough macro progress, while the political elections of autumn 2016 brought a very pro-reformist cabinet into power", RBA said in its weekly CEE outlook.
RBA said that the government's projections look realistic with an official GDP growth forecast of 3.2% year-on-year, matching the 3.1% expectation of the European Commission. It, however, said it expects a slightly higher economic growth for Croatia, of 3.3% this year.
"Strict budget discipline is likely to bear positive results, including this year, while tax overhaul results are likely to emerge closer to 2018", RBA said. "Altogether, if sustained, the positive developments would be able to trigger a positive re-rating process, while the continuation of the current economic policies and the successful debt reduction could result in positive outlooks by the end of 2017".
RBA added that in any case it expects a one notch upgrade to BB+/Ba1 by mid-2018.
Since Moody's last rating update, Croatia has held a snap election and a new government has been appointed.