The first reason behind Moody's decision to downgrade Croatia's government bond rating to Ba1 is the country’s reduced growth prospects given the structural challenges of its economy. Insufficient fiscal consolidation, which will remain restricted in the medium term by the government's lack of fiscal flexibility and the challenging economic environment along with its external vulnerability also contributed to this decision.
Moody's has assigned a stable outlook to Croatia's government bond rating as the risk that the government's fiscal position and debt will materially deteriorate any further is limited.
Impact on investors: Croatia’s Moody rating downgrade to Ba1 urges for a straightforward economic recovery coupled with sustained reductions in government debt.