The Lithuania’s Ministry of Finance announced that Standard & Poor’s (S&P) Ratings Services has revised its outlook on Lithuania by increasing it from negative to stable. The agency also declared that Lithuania’s Long Term local and foreign currency sovereign credit rating is at BBB and is Short Term rating is at A-3.This increase of ratings is due to the Cabinet’s successful budget cuts and Lithuania’s strong political will to keep its currency stable.
In the press release issued by the S&P its analyst Frank Gill said “The ratings on Lithuania reflect clear commitment across all political parties to support and implement budgetary and structural policies which anchor the currency board regime and enhance the economy’s flexible labor and goods markets”. He also added by saying, “While the resulting unemployment and deflation of nominal income are weighing on tax collection, the process should ultimately result in a stabilization of national income as net exports stimulate growth”.
This fantastic news to Lithuania, which has experienced an unprecedented drop of its GDP in 2009. According to the latest report from the Statistics Department Lithuania’s GDP in 2009 contracted by 15 pct. However, the Lithuanian GDP grew in the last two consequent quarters even though only by 0,1 pct in the last quarter of 2009.
The Ministry of Finance, who is famous for its cautious forecasts announced that it expects Lithuania’s GDP, in the realist case scenario, to grow by 1.6 pct in 2010, up from negative 4.3 pct GDP grow in its last forecast. The Ministry of Finance stated in its press release;
Recovery in Lithuania’s investment climate will translate into GDP growth of 1.6 percent this year and 3.2 percent in 2011. Last autumn, ministry analysts expected a contraction of 4.3 percent in 2010, with a return to growth coming in 2011.
Export volumes have begun to pick up significantly in the second half of 2009 thanks to a broad-based recovery in the EU. The ministry expects Lithuanian export growth to enter double-digit territory and could make up 13-18 percent in 2010.
“Based on a detailed analysis of export data, we see clear signs of a vigorous and rapid recovery of exports and if this trend continues we will see double-digit growth in 2010,” said Lithuania’s Finance Minister Ingrida Šimonytė.
The latest report from the S&P is great news for the Prime Minister Andrius Kubilius who is on a tour in the USA to promote Lithuania’s economic recovery and inform, especially the US IT companies about great opportunities to do business in Lithuania.