ECONOMIC OUTLOOK: Moody’s Downgrades Government’s Bond Rating to “Junk” Status

Moody’s Investors Service downgraded Croatia’s government bond rating to Ba1 from Baa3. Moody’s has also changed the outlook to stable from negative.  Moody’s cited the following reasons: the absence of an economic recovery and the expectation that the situation is unlikely to improve significantly as growth is structurally constrained; insufficient fiscal consolidation and the government’s lack of fiscal flexibility and the challenging economic environment; and Croatia’s external vulnerability indicators and government financial metrics that compare unfavourably with countries rated Baa3.  Moody’s also downgraded the City of Zagreb and Croatia Electra (HEP) to Ba1.

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