Financial Schools Reviews

() - Wednesday, rating agency Moody’s Investors Service raised the outlook on the Lithuanian government’s Baa1 ratings to stable from negative.

The rating upgrade reflects the relatively rapid stabilization of the economy and decline in financial stress across the region. The outlook on the Baa1 foreign currency deposit ceiling was also changed to stable from negative.

“The Lithuanian economy has stabilized more quickly than previously anticipated, and also faster than the other Baltic countries,” said Kenneth Orchard, vice-president/senior credit officer in Moody’s Sovereign Risk Group. After an incredibly sharp downturn beginning in mid-2008, the recession apparently ended as early as the third quarter of 2009.

However, the government’s budget deficit remains high, which will cause debt to continue to increase. “Government plans to reduce the deficit below the 3% of GDP Maastricht criterion by 2012 may be overly ambitious in the current economic environment, and the Baa1 rating assumes a more gradual improvement,” Orchard said. “However, if the government is able to implement its plan, allowing euro adoption in 2014, there would likely be upward pressure on the rating over that time frame.”

The last rating action on Lithuania was implemented on 28 September 2009, when Moody’s downgraded the government’s local and foreign currency ratings to Baa1 with a negative outlook from A3 with a negative outlook.

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