Bloomberg News

Lithuania’s Credit Rating Raised by Fitch on Growth, Budget

April 05, 2013

Lithuania’s credit rating was raised one step by Fitch Ratings, which cited the Baltic nation’s economic recovery and narrowing budget deficit.

Fitch raised Lithuania to BBB+, the third-lowest investment grade, on par with Malta, Ireland and Kazakhstan, according to a statement today from London. Moody’s Investors Service also rates the country at its third-lowest investment grade, Baa1, while Standard & Poor’s has it one level lower at BBB.

“Lithuania’s turnaround in its public finances has increased confidence in its sovereign creditworthiness with the country benefiting from record low yields in recent bond auctions,” the ratings company said. “Growth surprised on the upside in 2012, while euro-zone downside risks have not materialized.

The Baltic nation, the second-fastest growing in the European Union last year, is seeking to adopt the euro in 2015. This year’s budget envisages narrowing the fiscal shortfall to 2.5 percent of gross domestic product from 3 percent in 2012, the maximum allowed by the EU for countries within the euro region, as the economy grows an estimated 3.5 percent.

The yield on Lithuania’s bonds due 2018 fell 9 basis points to 2.418 percent, the lowest level since Jan. 25, as of 7:15 p.m. in Vilnius, the capital.

‘‘The upgrade is well deserved,” Viktor Szabo, who helps oversee $11.8 billion at Aberdeen Investment Management Ltd. in London, said by phone. “They did a good job. They did what most European countries should do: good crisis management, acceptable debt metrics and outstanding growth. I think if not for the European debt crisis, they would have been upgraded earlier.”

Constraints on Lithuania’s rating include “shallow domestic capital markets, high and structural unemployment and adverse emigration trends,” Fitch said.

To contact the reporters on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net; Lyubov Pronina in London at lpronina@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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