International credit ratings agency Standard and Poor's (S&P) on Friday maintained Croatia's "BB/B" sovereign credit rating with a stable outlook, but concerned about the country's consecutive recession and rising public debt.
In its report, S&P said that external balances are stable and S&P believed fiscal consolidation will occur within the confines of the European Commission's excessive deficit procedure.
Croatian real GDP will decline by 0.9 percent in 2014, a continue recession for the sixth year. The output has now diminished by 12.5 percent from 2008, S&P said, forecasting GDP growth of 0.6 percent in 2015 and rising to 2.0 percent by 2017.
The agency believes the absence of structural and fiscal reforms to drag on economic growth and cast doubts over the long-term sustainability of Croatia's public finances.
It said that the ratings are supported by medium-term opportunities coming from Croatia's EU accession in terms of addressing key growth areas, improving competitiveness, and meeting productivity challenges.
"However, these near-term economic benefits will be limited by existing structural challenges, political constraints to fiscal reforms, leveraged public- and private-sector balance sheets, and an unfavorable external environment", it said.
It viewed Croatia would likely take a bit longer to meet the EC's targets to reduced its budget deficit under 3 percent, forecasting the general government deficit will still be 4.8 percent of GDP in 2014, before gradually shrinking to 3 percent by 2017.