FinMin sees Moody's lowering Croatia ratings as results of reforms delay

Croatian government was aware of Moody's warning and would no longer hesitate to implement reforms, Finance Minister Zdravko Maric said on Saturday after Moody's lowering the country's credit ratings.

Moody's decision was a result of constant hesitations and delays in implementing reforms, he said, adding the government was fully aware of the warning and would carry out a reform package from this year.

The government has drawn up draft 2016 budget which showed clearly how it will strengthen the potential of economy and stabilize public finances through structural reforms this year and the years to come, he said.

According to the budget, the deficit will decline below 3 percent of GDP and along with the activation of state property, it would help stabilize the public debt and reduce it in the coming years, Maric said.

On Friday Moody's downgraded the credit ratings for Croatia's long-term debt from Ba1 to Ba2 and maintained the negative outlook.

It explained the key reasons for the downgrade were a large and increasing public debt and the continuation of poor prospects for economic growth in the medium term.

Moody's predicted the government's debt would increase to around 90 percent of GDP by 2018 from about 86 percent in 2015 and trend was unlikely to reverse much before the end of the decade.

It believed the fiscal deficit would stand around 3.9 percent of GDP this year, higher than the 3 percent of GDP criteria required to exit the European Union's (EU) excessive deficit procedure.

Although Croatia's economy emerged from a six-year recession with a growth of 1.6 percent in 2015, the agency said, adding it expected to grow around 1.5 percent only in 2016.

By now the world's three major credit rating agencies - Moody's, Fitch and Standards & Poor's - keep Croatia's rating two notches below the investment level with a negative outlook. Endit