Economists React to Credit Rating Downgrade

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Analysts say that the main problem is that there are no structural reforms being implemented

Moody’s rating agency yesterday downgraded its long-term credit rating of Croatian debt and maintained the negative outlook. Economists are unanimous in their assessment that the Moody’s analysts wrote only what we all know – there are still no serious structural reforms being implemented in Croatia, reports Večernji List on March 13, 2016.

“Moody’s was waiting for the new Croatian government and expected it to follow the recommendations of the European Commission and initiate structural reforms. But they saw that it had continued with the same policies and that nothing had changed”, said economic analyst Damir Novotny. He added that the European Commission clearly said what should be done.

Economic strategist of HSLS Josip Budimir also said Moody’s recommendations were similar to what the European Commission had announced. “Anyone who comes to power does exactly the same thing the previous government did. We invent optimism without any basis, just in order to avoid serious reforms”, said Budimir.

According to economic analyst Željko Lovrinčević, reforms should be radical. That would mean a significant reduction in the number of employees in the public sector, by about 35,000 to 40,000 jobs, elimination of parallel structures between agencies and government institutions, termination of financing of various interest groups and the majority of NGOs from the state budget.

“Reforms should be the main aim of the government, otherwise, it does not make any sense”, said Lovrinčević. It is dangerous, he added, that Croatia’s rating has a negative outlook and could be further lowered if nothing changes. He noted that Croatia now had good external factors – low-interest rates of the European Central Bank, low oil prices, the growth of tourism – but in the next two years all that could change. If Croatia does not improve its credit rating before that, interest on the debt will begin to grow and that will bring problems for debt refinancing.


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