DBRS Upgrades Republic of Lithuania to A, Stable Trend

Date

2019 07 12

Rating
0
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DBRS Ratings GmbH (DBRS) upgraded the Republic of Lithuania’s Long-Term Foreign and Local Currency – Issuer Ratings from A (low) to A, and maintained the Stable trend.

The A ratings are underpinned by Lithuania’s sound fiscal position and its low public debt ratio. According to DBRS, other credit strengths are as follows: meeting OECD standards and benchmarks, Euro system membership, progress with the reform agenda, including measures that reduce the tax burden on low income earners and narrow the employers’ tax wedge, as well as efforts to improve tax compliance. Credit challenges relate to structural factors including income inequality; further productivity improvements; a still low investment rate; the declining and ageing population and economic informality.

DBRS noted that public debt vulnerabilities to external shocks are mitigated by a low public debt ratio and strong debt management.

Currently, the Lithuanian economy is benefitting from improving net migration, but competitiveness could start to be hampered by high wage growth although the comparative wage base level is favourable.

Also, the DBRS report emphasises that risks to financial stability appear contained.