HUP Director-General Davor Majetic told the media that the downgrade would lead to a further rise in the cost of borrowing for Croatia and Croatian companies on foreign markets. He said that it was a warning that reforms were necessary in order to create a competitive environment for investment and job creation in the country. "It's high time we all rolled up our sleeves and got down to it," he stressed.

Majetic said that the responsibility for this did not only lie with the government, which should be the leader of change, but "with everyone in the country, because we should all take part in the reforms." "If we don't change anything and continue doing little or nothing, as we have in the last five years, the rating will remain the same or will even fall further," he added.

Majetic said it was high time Croatia defined short- and long-term reform goals that would lead to development and greater competitiveness.

Moody's decision did not surprise members of Parliament either. They said in their comments that the downgrade could have been expected because the government had failed to secure fresh investments and put a stop to unemployment.

Moody's on Friday downgraded Croatia's credit rating to Ba1 from Baa3, citing poor economic growth prospects and the government's lack of fiscal flexibility. The agency also changed the outlook on Croatia's rating from negative to stable, saying there was only a limited risk of a significant deterioration of the government's fiscal position and debt.