According to the press release published on 31 January 2008, Fitch Ratings affirmed the Republic of Estonia’s long-term foreign currency and local currency Issuer Default Ratings at A and A+, respectively. The outlook was changed to negative from stable.
“In Fitch’s opinion, risks caused by the global financial market turbulences have increased in Eastern Europe as a whole. The fact that Estonia’s outlook was changed to negative means the likelihood of the country’s rating being downgraded over the next year or two has increased,” commented Deputy Governor of Eesti Pank Märten Ross.
In Ross’ opinion, affirming the country’s ratings at their current A/A+ level is the most important for Estonia. “Fitch believes that a soft landing is the principal economic development scenario for us,” he said.
At the same time, the agency’s decision reflects the risks that accompanied previous years’ rapid economic expansion. “Fitch’s analysis refers to Estonia’s fast credit growth and current account deficit, as well as to increased inflation. Still, the main reason why the outlook was changed is the global financial market turbulences of the past six months,” commented Deputy Governor Ross.
According to Märten Ross, Estonia’s economic indicators clearly show the risks characteristic of the previous year have started to withdraw. “The domestic demand growth rate is inhibiting and the growth of bank loans is also slowing rapidly, whereas our exports growth remains strong and the current account and trade deficits are decreasing vigorously. Estonia’s further growth in the changed economic environment will be supported by the strong financial sector and the budget planned with a surplus. The uncertainties apparent in the global financial market have not had a considerable impact on the Estonian banking sector,” he added.
The last time Fitch provided its assessment to Estonia was in July 2007, when the country’s rating was affirmed at A1 with a stable outlook. On 22 January 2008, the rating agency Standard & Poor’s affirmed Estonia’s sovereign rating at level A, leaving the outlook negative. In July 2007, Moody’s affirmed our sovereign rating at A, changing the outlook to stable form positive.
The translation of the Fitch press release will be published on the web site of Eesti Pank.