Fitch downgrades Baltic ratings

TALLINN - In thelatest twist in the Baltic states' plummet into aneconomic hard landing, the Fitch international rating agency has downgradedsovereign ratings on all three countries. The economic outlook on the countriesremains unchanged at negative.

"The downgrade of the Baltic states reflects the risk that thedeterioration in the European economic and financial environment will impose amore costly macroeconomic adjustment in the Baltic countries, given their largebank-financed current account deficits," Edward Parker, Head of EmergingEurope sovereigns at Fitch, was quoted by the Baltic News Service as saying.

The downgrade of the Baltic states reflects the riskthat the deterioration in the European economic and financial environment willimpose a more costly macroeconomic adjustment in the Baltic countries, giventheir large bank-financed current account deficits, Fitch said.

The further deterioration in global and, especially European, financialconditions and the likelihood of recession in the euro area have heightened therisks for economies with large external financing needs and reliance on bankfinancing, the agency said.

Estonia'slong-term foreign currency Issuer Default Rating (IDR) was downgraded to A- (Aminus), from A. Outlook remains Negative. The country's long-term localcurrency IDR was downgraded to A, from A+. Outlook remains Negative. Short-termforeign currency IDR was affirmed at F1.

Latvia'slong-term foreign currency IDR was downgraded to BBB, from BBB+. Outlookremains Negative. Long-term local currency IDR was lowered to BBB+, from A- (Aminus). Outlook remains Negative. Short-term foreign currency IDR wasdowngraded to F3, from F2.

Lithuania'slong-term foreign currency Issuer Default Rating was downgraded to A- (Aminus), from A, while the long-term local currency IDR was cut to A, from A+.Short-term foreign currency IDR was affirmed at F1, the agency said in astatement.