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BNS - Moody's Investors Service on Wednesday raised the outlook on the Estonian government's A1 ratings to stable from negative.
It said the action was prompted by a clear improvement in Estonia's financial and economic prospects since mid-2009, and the likelihood that the country will be admitted to the eurozone in January 2011.
The outlook on the A1 foreign currency deposit ceiling was also raised to stable.
"Estonia's economy and banking sector are exhibiting signs of a gradual recovery," said Kenneth Orchard, vice-president of Moody's Sovereign Risk Group.
"Equally important, the government's impressive fiscal performance in 2009 means that Estonia is likely to be permitted to adopt the euro next year," Orchard said.
He added that given the economic circumstances, and the relative fiscal performance compared to the current eurozone members, it will be very difficult for anyone to argue against Estonia's entry.
According to Moody's, euro adoption, which is expected to be formalized by the various EU bodies in June, is an additional enhancement to the government's creditworthiness.
"EMU membership will eliminate balance of payments and currency risk emanating from the private sector's large stock of foreign currency-denominated loans," Orchard said.
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