Croatia Retains A- Rating Despite Economic Vulnerabilities

Fitch Ratings has confirmed Croatia's Long-Term Foreign-Currency and Local-Currency Issuer Default Ratings at 'A-' with a stable outlook. This rating reflects the country's 'credible policy framework', which is anchored by its EU and Eurozone membership, strong economic growth, and a record of fiscal discipline.

Fitch noted that while Croatia has made significant progress in reducing public debt/GDP, it still lags behind peer countries in terms of GDP per capita and institutional capacity. The agency also warned that the country's relatively small economy makes it vulnerable to external shocks.

Croatia's economic growth is expected to slow to 2.4% in 2026 from 3.4% in 2025, but will remain above the projected peer median and Eurozone forecast of 0.9%. Private consumption will drive growth, while investment will be supported by EU fund inflows.

The country's heavy reliance on tourism, which accounts for about 25% of output, leaves it exposed to external demand shocks and eroding price competitiveness. Fitch also noted that Croatia faces structural challenges, including weak productivity growth and fast-paced wage growth, which has pushed up unit labour costs.