Lithuania earns better credit outlook

  • 2013-10-31
  • From wire report

VILNIUS - Having assessed the government’s fiscal policy and Lithuania’s economic growth, international credit rating agency Standard and Poor’s has improved Lithuania’s long-term credit rating outlook from stable to positive, reports ELTA.
Minister of Finance Rimantas Sadzius said that this is good news which shows confidence in Lithuania. It also reflects expectations that Lithuania will continue responsible fiscal policy, will consistently and decisively seek membership in euro area.

Standard and Poor’s has improved the long-term credit rating outlook after assessing the government’s policy, which ensures sustainability of public finances, and the prospective continuity of this policy. It also took into account that Lithuania is one of the leading countries in Europe in utilizing the EU structural support. The agency anticipates that Lithuania’s economy will continue to grow consistently while inflation will be moderate.
Currently, Lithuania’s long-term foreign currency credit rating is set as BBB, it has not changed since March 2009. In order to improve this rating, Lithuania has to keep to policies ensuring healthy and sustainable public finances (reflected by the Maastricht criteria) allowing it to adopt the euro in 2015.

“Economists at the Bank of Lithuania, who recently evaluated the influence of euro adoption on the economy, said that main credit rating agencies assess euro adoption as a factor reducing credit risks. In addition, Estonia’s and Latvia’s examples show that the ratings can be improved even before the euro is introduced. However, sustainable public finance policy has to be maintained,” said Ruta Rodzko, head of Economics and Financial Stability at the Bank of Lithuania.
The research conducted by the Bank of Lithuania showed that the improved ratings would make credit cheaper. It is estimated that in the year when the euro is introduced the interest on government securities would decrease by 0.80 percentage points. Meanwhile, for people and businesses the cost of borrowing would be lower by 0.49-0.56 percentage points.