The London based agency has again downgraded the Baltics.
Fitch reported having cut Estonia's default rating from A- to BBB+, Latvia's rating from BBB- to BB+ and Lithuania's rating from BBB+ to BBB.
Latvia, now in the midst of a deep recession, is the economically hardest hit in the EU, after seeing several years of outstanding growth after joining the EU.
"The downgrade of Latvia's ratings reflects the deterioration in the prospects for the Latvian economy and elevated risk of policy slippage" since Riga clinched a 7.5-billion-euro (9.99-billion-dollar) bailout from the International Monetary Fund, the EU and other lenders in December, Fitch said.
The Latvian Finance Ministry said that the ratings downgrade would not affect the government's plan of stabilization, but that it may negatively affect investment.
Fitch said it expected a 12 percent fall, but now says that the budget deficit may rise to 10 percent of GDP in 2009.
Estonia, a country of 1.3 million people, posted 10.4-% growth in 2006 and 6.3% in 2007. But output fell 3.6% in 2008 and the government forecasts an 8.5-% slump this year.
It would seem that the crisis in Latvia is initiating a domino effect, reports Fitch, who decided to downgrade Estonia and Lithuania due to speculative fears that they might be hit by the same crisis being so closely tied to Latvia.
Fitch reports a ten percent contraction for both Estonia and Lithuania.
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