On Wednesday, April 8, Fitch Ratings downgraded Estonia's sovereign rating by a notch, from A- to BBB+. The rating outlooks
remained negative.
"Fitch's decision reflects changing risk assessments in the world and in the region. The
agency listed as factors supporting Estonia's rating the general government fiscal reserves of 9% of GDP at end-2008, low general government
debt level and improved economic balance, including contracting current account deficit. At the same time, Fitch notes that declining
vulnerabilities have brought along falling property prices and growing unemployment, which are taking a toll on the real economy," said
Märten Ross, Deputy Governor of Eesti Pank.
According to Ross, the rapid adjustment in the labour market and lowering
inflation prove that Estonia's economy has been very flexible in the current external environment. The rebalancing of Estonia's
current account is also continuing, since preliminary data show that goods and services exports in January outstripped the imports.
"The fact that the rating agency calls in question the sustainability of Estonia's fiscal policy and the country's
fiscal deficit reaffirms the significance of strong fiscal policy. In order to ensure Estonia's credibility as well as the possibility of
adopting the euro, it is important to make necessary decisions and keep this year's fiscal deficit below 3% of GDP," Ross noted.
The last time Fitch Rating assessed Estonia's sovereign rating was in October 2008, when the agency downgraded the
rating by one notch. In October 2008, Standard & Poor's affirmed Estonia's sovereign rating at A negative, and Moody's
confirmed Estonia's rating at A1 with a stable outlook in September.
See also the statement released by
Fitch Ratings.
