Moody’s Investors Service to raise the credit ratings outlook for Latvia and Lithuania, as their economies recovered faster than expected. Baa1 rating to the prospect of Lithuania was upgraded to stable from negative, and also that of Latvia, but rating Baa3. Credit rating agencies increase the prospects for regional stability signals and actions of governments to address the budget deficit. Over the past two months by Standard and Poor’s and Fitch Ratings raised its outlook for Estonia, Latvia and Lithuania stable from negative. “The Lithuanian economy is stabilized faster than expected and those of other Baltic countries,” said Kenneth Orchard, an analyst at Moody’s. According to him the recession ended in the third quarter of last year and this will have a moderate positive effect on the finances of the Government, expressed in a smaller budget deficit and slower growth of debt. In Latvia, the “worst of the recession has passed and will support the restoration of Finance of the Government and the banking sector,” said Orchard. “The prospect of a disorderly devaluation of the currency is now unlikely.” Latvia requested assistance from the EU and the International Monetary Fund amounting to 7.5 billion in 2008, having acquired its second largest bank. In the fourth quarter of the country’s economy contracted by 16.9 per cent.
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Lithuania will not adhere to the “painful” scheme for adopting the euro, which will shrink consumption and greatly harm the economy, said Prime Minister of the country Cubilus Andrews. The country probably will fail to meet EU requirements for the deficit within 3 percent of GDP by 2011, so the adoption of the euro can not happen before 2013, said in an interview yesterday, Finance Minister of Lithuania Ingrid Simon. “These are very ambitious and very painful measures, and, of course, there are any limits on what measures can enter,” said Cubilus. The aim is not to kill the entire economy and stability in society by reducing costs, salaries and pensions. Lithuania’s economy contracted by 14,3 per cent in the third quarter after the government took budget cuts, equivalent to 8 percent of GDP this year. Even after these stringent measures, the evaluation of the European Commission Lithuania will have a deficit of 9,7 per cent in 2011 to 9.8 per cent for this. Lithuania, whose currency – liras is tied to the euro should be introduced European single currency “as soon as possible, but the opportunities in turn have practical limits and practical measures should be introduced,” said Cubilus. The government has proposed the 2010 budget cuts of 5 percent of GDP, aimed at social welfare. Lithuania lags behind neighboring Estonia, which plans to join the eurozone from January 1, 2011, after years of using the government budget surplus for the establishment of reserves. This allowed the public finances remain intact even after the crisis hit the country.
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