S&P Global Ratings Assessed the Prospects of the Lithuanian Economy
On Monday evening, the international credit rating agency S&P Global Ratings published a report on Lithuania with the assessment of the prospects of the country's economy. The Agency's experts are positive about Lithuania's fiscal policy and membership in the euro area and NATO, as well as the relatively stable and low level of general government debt.
Standard & Poor's analysts consider Lithuania's situation to be stable, therefore a decision was made not to change the country's current A+ long-term credit rating (negative outlook) and to publish a report instead of a review of the country's rating.
"During the last few weeks, three credit rating agencies left the credit ratings they had previously granted to Lithuania. They base their decisions on the country's fiscal and macroeconomic policy, as well as the low general government debt. This shows that the agencies do not see any significant changes at the moment and assess the country's situation as stable," says Minister of Finance Gintarė Skaistė.
The Agency’s experts note that despite the deficit, the general government debt remains low. Standard & Poor's projects that the budget deficit will increase to 2.5 % of GDP this year (compared to 0.6 % of GDP last year), and will then gradually decrease to 1.1 % of GDP in 2026. The general government debt should remain low this year and reach slightly more than 30% of GDP, and inflation will decrease to 8.7 %.
Standard & Poor's notes that the longer the war in Ukraine continues, the greater the possible negative impact on the openly competitive Lithuanian economy is, but it is offset by Lithuania's membership in the European Union and NATO. The Agency’s analysts note that NATO forces in the Baltic countries have expanded, which means enhanced cooperation on security issues, including cyber threats. Also, Lithuania does not import energy from Russia, thereby ensuring energy security.
The last time S&P Global Ratings reviewed Lithuania's rating was last December, when it left valid the A+ long-term credit rating granted in February 2020, changing the outlook from stable to negative. They then mainly motivated their decision by the protracted war in Ukraine and the negative impact on the regional economies. It is worth noting that when a positive/negative outlook is determined, the decision on the rating or outlook action must be taken by the Agency within 24 months.
Last April, another international credit rating agency, Moody's Investment Service, approved Lithuania's long-term credit rating A2 (stable outlook) granted in February 2021; in May, Fitch Ratings reaffirmed the A long-term credit rating granted to Lithuania in January 2020 and left a stable outlook, while DBRS Morningstar – A (high) long-term credit rating (stable outlook) granted in November 2021. More information is available here.
Additional information:
A credit rating is an indicator providing investors (creditors) with concise information on the level of the debtor’s capacity to discharge its financial commitments. A high credit rating indicates a lower risk of the debtor’s (issuer’s) default, and, accordingly, a lower cost of borrowing.
S&P Global Ratings is part of a group of influential credit rating agencies, including Fitch Ratings and Moody's Investors Service. For credit ratings they use particular grades and symbols, and set a credit value to borrowing countries and companies by using standardized credit ratings.
Last updated: 09-06-2023
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