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BNS - The international rating agency Moody's Investors Service today lowered the credit ratings of Latvia and Lithuania but left the Estonian rating unchanged.
Moody's confirmed the foreign and local currency ratings of the government of Estonia at A1. The long-term foreign currency bank deposit ceiling was also confirmed at A1. The outlook for these ratings was changed to negative.
The upper limit of foreign currency obligations rating for companies operating in Estonia is Aa1 with a stable outlook.
Moody's has concluded that the Estonian government's creditworthiness is likely to remain resilient in the face of a deep and potentially prolonged recession.
The government is working to keep the budget deficit under control, liquidity is secure and the government is relatively well isolated from problems in the banking sector, the agency said in its information.
Disciplined fiscal policy during the boom years, plus an impressive fiscal adjustment in reaction to the current circumstances, means that the budget deficit is likely to remain within the 3 percent of GDP Maastricht threshold in 2009.
This performance -- one of the best in the EU -- should permit Estonia to exercise its "exit strategy" and officially adopt the euro in January 2011, Moody's said.
Moody's views entry into the Eurozone as positive for Estonia's creditworthiness.
The negative outlook for the Estonian government's ratings reflects the high degree of uncertainty for the Estonian and regional economic outlook.
Moody's believes that the Estonian economy is unlikely to stabilize without some support from external demand.
A more uncertain outlook for entry into the Eurozone could likely place some modest downward pressure on the government's rating.
Possible problems in Latvia are an additional risk for Estonia.
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