Baltic economies get ratings boost from Moody's

Mar 31, 2010, 12:36 GMT

Riga - The three Baltic states of Estonia, Latvia and Lithuania received a boost Wednesday when ratings agency Moody's improved its outlooks for all three countries as a result of quicker- than-expected improvements in the region's economies.

Though the ratings themselves remained unchanged, Moody's raised the outlook on the Estonian government's A1 ratings to stable from negative. The Latvian government's Baa3 ratings were also switched to stable from negative and the Lithuanian government's Baa1 ratings received the same treatment.

Announcing the news, Moody's said a decline in financial stress across the region was responsible for the improved outlooks.

Kenneth Orchard of Moody's said Estonia appeared to have exited its recession and was on course to join the eurozone in 2011.

'Estonia's economy and banking sector are exhibiting signs of a gradual recovery,' said Orchard. 'Equally important, the government's impressive fiscal performance in 2009 means that Estonia is likely to be permitted to adopt the euro next year.'

Estonia still faced challenges but ongoing reforms could result in ratings upgrades 'over the near to medium term' Orchard said.

The largest of the Baltic economies, Lithuania, had 'stabilized more quickly than previously anticipated, and also faster than the other Baltic countries,' Orchard said, though he warned that plans to meet the Maastricht criteria governing euro adoption by 2012 might be 'overly ambitious.'

With regard to Latvia, Moody's said that fears about a possible currency devaluation had passed and that the worst part of a recession which saw the economy contract 18 per cent in 2009 was over.

Latvian Finance Minister Einars Repse responded by saying the improved outlook sent 'an important signal to investors and the whole international community.'

'We have a good chance to restore our economic growth,' Repse said.