The credit rating agency Moody’s has downgraded Croatia’s credit rating to ‘junk’.
According to Moody’s statement, the rating has been lowered from Baa3 to Ba1. Moody’s has also changed the outlook for Croatia’s rating from negative to stable, stating that there is only a limited risk of a significant deterioration in the government’s fiscal position and indebtedness.
– The government’s capacity to rebalance the economy towards exports is genuinely limited. The expected entry of the country into the EU in July 2013 is a positive development, but the European environment and the government’s reform inertia are likely to limit the benefits that are generally believed to be expected to increase – the agency for issuing credit ratings states in its announcement.
Another impetus for the downgrade of Croatia’s credit rating was the brakes on fiscal consolidation, namely the unfavorable economic environment and the lack of fiscal flexibility of the government along with a relatively high level of debt, Moody’s further states.
The third impetus for such a decision by Moody’s is the weakening of Croatia’s credit metrics compared to similar countries, particularly its external sensitivity and fiscal position.
– The government’s fiscal metrics are also weaker, while the general government’s debt exceeds the debt levels of those countries that have a Baa3 rating – it is stated among other things in Moody’s announcement.
