According to Standard & Poor’s methodology, after establishing a positive or negative outlook, the agency has two years to take a decision to upgrade or downgrade the country’s credit rating accordingly. In December 2022, the credit rating agency Standard & Poor’s changed Lithuania’s credit outlook from stable to negative (the ‘A+’ credit rating was granted to our country in February 2020) on the grounds of the protracted war in Ukraine. The adjusted rating of the agency remains in the higher investment rating group.
On Friday,the agency took the same decision for Latvia and Estonia, downgrading their credit ratings to ‘A’ and ‘A+’ respectively, with stable prospects.
“The decision of the credit rating agency was determined by the geopolitical situation in the region due to the ongoing Russian war against Ukraine. Lithuania takes its security seriously: over the past four years, in response to increased risks, we have doubled our defence spending, and we are currently discussing at political level additional sustainable sources of revenue that will allow us to increase defence spending to 3% of GDP”, says Minister of Finance Gintarė Skaistė.
Standard & Poor’s is of the opinion that Russia’s war against Ukraine and geopolitical risks in the region will affect Lithuania’s public finances, economic growth and competitiveness in the medium term. However, they acknowledge that these effects are difficult to predict.
Experts believe that risks will be offset by the accelerating economic recovery due to stronger domestic and foreign demand and continued prudent fiscal policy.
According to Standard & Poor’s analysts, Lithuania’s rating is strengthened by the country’s effective economic policies and membership of the euro area, as well as the low level of public debt. They forecast that the Lithuanian economy should return to growth of 2% this year.
The agency's latest report is available here.
After Standard & Poor’s changed Lithuania’s long-term credit rating, it equalised the ratings granted to our country by two other agencies, Fitch Ratings and Moody’s Investment Service (the values of credit ratings can be found here). Two weeks ago,Fitch Ratings reaffirmed Lithuania’s ‘A’ long-term credit rating granted in January 2020, leaving a stable outlook. In April this year, the same high credit rating – ‘A2’ (stable outlook) – was reaffirmed for Lithuania by credit rating agency Moody’s Investment Service (upgraded in February 2021), ‘A’ (high) with a stable outlook – by credit rating agency DBRS Morningstar (upgraded in November 2021).
More information on Lithuania’s credit ratings is available here.
Additional information:
A credit rating is an indicator that provides investors/creditors with consolidated information on the level of the borrower’s ability to meet its financial obligations. A high credit rating indicates a lower risk of default of the borrower/issuer and, accordingly, lower borrowing costs.
S&P Global Ratingsis part of a group of influential credit rating agencies such as Fitch Ratings and Moody’s Investors Service. They use certain classification and symbols to express credit ratings and to determine the credit value for borrowing countries and companies by using standardised credit ratings.
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