Fitch Ratings-London-03 October 2014: Fitch Ratings has affirmed Lithuania’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘A-‘. The Outlooks are Stable. The issue ratings on Lithuania’s senior unsecured foreign and local currency bonds have also been affirmed at ‘A-‘. The Country Ceiling has been affirmed at ‘AAA’ and the Short-term foreign currency IDR at ‘F1’.

KEY RATING DRIVERS

The affirmation and Stable Outlook reflect the following factors: Upcoming membership into the eurozone will further enhance Lithuania’s already effective policy-making and governance. 

Adoption of the single currency will reduce credit risks associated with foreign currency exposures on the sovereign’s balance sheet and in the banking system, as well the country’s still high level of net external debt. The euro’s reserve currency status will also enhance the sovereign’s fiscal and external financing flexibility, while Lithuanian banks will gain access to European Central Bank (ECB) liquidity facilities. Lithuania will remain one of the fastest growing countries in the EU. Our latest forecast is that Lithuania’s GDP will grow 3.0% in 2014, followed by growth of 3.5% in 2015-2016. However, Lithuania’s small and open economy does leave it vulnerable to external shocks. A history of large boom-bust cycles means Lithuania’s volatility of GDP and five-year average real GDP growth is significantly weaker than the ‘A’ median.

 

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