The downgrade of its credit rating makes the situation even more difficult for Croatia and creates more difficult conditions for the government and the economy, notably for those borrowing abroad, Finance Minister Slavko Linic said on Friday evening commenting on the decision of Standard & Poor's Ratings Services to lower its long- and short-term sovereign credit ratings on Croatia to 'BB+/B' from 'BBB-/A-3', citing insufficient reforms. The outlook is stable.
Until now, the rating was investment-grade, whereas now it has been downgraded to speculative or junk level.
According to Linic, because of the downgrade next year would be difficult to secure loans for the economy from both Croatia and abroad. He stressed the downgrade would also affect the increase of interest rates which, according to him, were already high, and would hamper the strengthening of Croatia's economic competitiveness.
The finance minister announced the government would examine the 2013 budget and continue to implement the policy of structural changes in state-owned companies and the financial reconstruction of the private sector through pre-bankruptcy settlements.
The government will most probably give up on some investments to save on budgetary users such as ministries and agencies, Linic said.
The government will also accelerate reforms in the judiciary, the education system and the health sector and realise the planned savings in expenditure costs for the employees in the public sector, as it has wrapped up negotiations with unions, Linic said.
The minister underlined the government did not plan further salary cuts in the public sector and that it would not reduce pensions or the total amount of social expenses.
He also said the government did not plan to increase taxes, announcing a stronger fights against the grey economy.
Asked if the government was now, after the S&P assessment, prepared to examine a deal with the International Monetary Fund, Linic said that in 2013 the government would most definitely consider cooperation with the IMF.
