From the Star Wars: Episode I Script, which I hope is legit and correct.
Don't get me wrongo. I have great faith in the boy. He's a credit to your race, but Sebulba there is going to win, I think.
What "race" is Watto referring to? The pod race, or the human race?
Given that Watto is a Toydarian, I'd say it's pretty likely he's referring to the Human race. In general, human's aren't capable of the skill / speed /reflexes needed, so Anakin managing to perform to that level is something he gives credit to. Also, he's addressing Qui-gon; another human.
Add the line before the one you quoted, and it's more visible:
('Your' is addressed to Qui-gon, referring to his (the Human) race.)
QUI-GON : You don't think Anakin will win?
WATTO : Don't get me wrongo. I have great faith in the boy. He's a credit to your race, but Sebulba there is going to win, I think.
A relevant quote:
Because of the reflexes needed to control the pod as it raced around the course at breakneck speeds, as well as the dexterity needed to control the pod racer, all pod racers (apart from Anakin Skywalker) were nonhumans. Inhuman physical attributes, as well as extra pairs of hands, came in handy when trying to control the pod at its top speed of around 900 km/h.
The human race. Pod-races require response time that most humans are incapable of producing. Anakin could due to his force sensitivity. The fact that Anakin can even compete is a testament to his species.
The film's official novelisation (based on Lucas' original screenplay rather than the finalised shooting script) is phrased slightly differently:
Watto snorted. “Don’t get me wrong,” he announced, shaking his head in an odd cocking motion. “I have great faith in the boy. He’s a credit to your species.” His snaggle-toothed mouth tightened. “But Sebulba there is going to win, I think.”
With that in mind, I think it's almost certain what Watto was referring to.
