Fitch downgrades Baltic ratings

TALLINN - In the latest twist in the Baltic states' plummet into an economic hard landing, the Fitch international rating agency has downgraded sovereign ratings on all three countries. The economic outlook on the countries remains unchanged at negative.

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

The downgrade of the Baltic states reflects the risk that the deterioration in the European economic and financial environment will impose a more costly macroeconomic adjustment in the Baltic countries, given their large bank-financed current account deficits, Fitch said.

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

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

Latvia's long-term foreign currency IDR was downgraded to BBB, from BBB+. Outlook remains Negative. Long-term local currency IDR was lowered to BBB+, from A- (A minus). Outlook remains Negative. Short-term foreign currency IDR was downgraded to F3, from F2.

Lithuania's long-term foreign currency Issuer Default Rating was downgraded to A- (A minus), 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 a statement.