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Moody’s Downgrades Croatia’s Credit Rating

Rating agency Moody’s, lowered Croatian debt over the long-term, matching Fitch and Standard & Poor’s to setting it at two levels below investment grade. 

High public debt and a poor outlook for the economy was cited by the rating agency who also left the country in a negative outlook.

Croatia’s public debt currently stands at 86% of GDP. However, analysts predict this will steadily increase to 90% over the next two years. The budget deficit for 2016 is expected to be 3.9%, stoking fears that public debt may be well over 90% by 2018 as analysts predict.

Positive reports of Croatia recently coming out of recession along with many other positive indications have had little impact in Moody’s expectations for the future. Whilst recognising growth for 2016 will be around 1.5%, the rating agency does not see unemployment coming down significantly.  Also, delays in European Union structural funds will be a drag to economic growth.

Moody’s noted that the government’s narrow majority could lead to a slow down in reforms.

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