Moody’s affirms A1 rating for Estonia

Moody’s Investors Service affirmed Estonia’s A1 government bond rating and stable outlook on 25 July. Moody’s confirmed Estonia’s A1 rating and stable outlook. The rating agency based its decision on conservative budgetary policies, a strong balance sheet, low levels of indebtedness, and sizable fiscal reserves.

“Despite the intensification of the euro area crisis, which will result in a slowdown of growth, Estonia’s susceptibility to external shocks is considered to be low. This is supported by negligible macroeconomic imbalances and a relatively healthy banking system,” the report from Moody’s said.

Moody’s praised the government’s commitment to satisfying the Maastricht Treaty criteria after the 14.3 % economic contraction in 2009. It also pointed to a budget surplus in 2011 despite a predicted deficit, as well as economic growth of 7.6 % last year (the highest growth in the euro area).

Moody’s expects lower growth of 1.7 % in 2012, due to decreasing external demand, increased government expenditures on energy investments and resumed contribution to the second-pillar social security fund. “However, Moody’s believes that the government’s demonstrated policy responsiveness and its commitment to conservative fiscal policies will compel a reversal of the budget deficit and the resumption of fiscal reserve accumulation,” the report said.

The full Moody’s report can be read here.

Source: Estonian Review

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