Fitch upgrades Estonia to AA-, says economy is stable

Rating agency Fitch upgraded Estonia's long-term foreign and local-currency issuer default ratings (IDRs) to AA- from A+ on Friday, adding that they expect it to remain stable at this point.

As the key rating drivers behind the upgrade Fitch named Estonia's current account surplus and "continued external deleveraging in the private sector, both of which have strengthened Estonia's external position, underpinning a strong net external creditor position equivalent to 16.6% GDP at the end of 2017 and mitigating Estonia's potential vulnerability to external shocks derived from its small size and highly open economy," the Baltic News Service reported.

"Meanwhile, despite an increase in unit labor costs, Estonia has maintained competitiveness due to a gradual shift in the tradeable sector towards higher value exports, particularly in services. For 2018-2019, Fitch forecasts an average current account surplus of 2.7% of GDP, in line with the projected median current account surplus of its AA category peers," Fitch said in the rating action.

A track record of prudent fiscal management within a credible fiscal framework has kept Estonia's public finances a key rating strength. At 8.7 percent of GDP as of late 2017, Estonia's public debt ratio is lower than that all A-rated states, and the third-lowest among its AA-rated peers after Abu Dhabi with 7.8% GDP and Macao at 0% GDP. Estonia's public debt ratio is projected to decrease further in the medium term, with Fitch forecasting a debt ratio of 7.3% by 2020.

"Following a general government deficit of 0.3% of GDP in 2017, Fitch forecasts Estonia will achieve fiscal surpluses of 0.5% of GDP and 0.3 percent of GDP in 2018 and 2019, respectively, better than Fitch expected at the time of the last review. We expect the current positive economic cycle and this year's tax reform to personal and corporate income tax to have a positive impact on government revenues in 2019," it said.

Fitch named Estonia's strong economic institutions, enhanced by its eurozone and EU membership as another key factor in the rating.

"Banking sector developments remain stable. Amid robust economic growth and low interest rates, credit activity has been strong in both the household and corporate sectors. However, lending standards have remained prudent, and borrowers' capacity good. Banks' asset quality and capitalisation are sound, with the ratio of non-performing loans now less than 1% of total loans, and Tier 1 capital ratio at 31.3%. Estonia's financial system is dominated by Nordic parent banks, which provide approximately 18% of total funding requirements of the sector. A Nordic originated external shock remains a tail risk," Fitch said.
Estonia to AA
If you notice an error, highlight the text you want and press Ctrl + Enter to report it to the editor
4 views in january
I recommend
No recommendations yet


Post your comment to communicate and discuss this article.

Even though education is a matter close to the heart of Estonia 200 leader Kristina Kallas, she cannot imagine herself fighting for the post of education minister: ideas can also be realized by someone else. You just took away Postimees’ editor-in-chief. In your opinion, how is the editorial to feel? Lauri [Hussar] had to give the matter thought, and I presume he did. We talked about why he wants to go into politics. Still, to what extent do you imagine wh...
TALLINN – Russia is seeking integration in Estonia only in words, Kalev Stoicescu, researcher at the International Center for Defense and Security (ICDS) who is running on the ticket of the Estonia 200 party in the March 3 general elections, said on Wednesday commenting on the words said on the subject by Russian Foreign Minister Sergey Lavrov.  "Russia is the only neighboring state which does not wish -- due to its own interests -- progress in integration...
Former top centrist Evelyn Sepp admitted that she donated money the origin of which was unknown to her to the Center Party in 2006. The former politician claimed other members also engaged in the practice but refused to name names. Sepp’s confession on ETV investigative journalism program «Pealtnägija» does not come as a total bombshell. She first said that such covert funding of parties is a widespread practice in the aftermath of the Silvergate scandal i...
"In addition to our ongoing programme of passenger vessel renovations, we are also continuing to upgrade and modernise our cargo vessels to ensure that we continue to develop this important part of our business," he noted, adding that the relocation of the company's Estonia-Finland cargo route to Muuga on the Estonian side in October 2017 and the launch of the Smart Port solution in Tallinn's Old City Harbour in spring 2018 both contributed to improved ser...
During the final week of 2018, a total of 2,524 patients with viral upper respiratory infections sought medical attention, 47.5% of whom were children. A total of 210 cases of influenza were laboratory confirmed, nearly twice as many as during the week before, according to Health Board data. Over the past two weeks, the number of flu cases has quadrupled. The majority of these cases were laboratory confirmed at emergency medical departments, from which pat...
I actually think that B1 is too low of a bar for attaining citizenship. You still can't participate in Estonian society on anything other than a superficial level as noted above, so I'm not sure how you can constitute a "citizen" on that basis. Naturally there has to be a high degree of arbitrariness, and that's precisely the point — whilst B1 level might be sufficient in German or French (I understand that it is the benchmark level when applying for citiz...
Following a white Christmas throughout most of Estonia, Wednesday will see sleet and even rain in parts of the country, and temperatures hovering around the freezing point will means slippery road conditions. Early Wednesday morning, many major highways were salted or wet, but some patches were still icy, the Estonian Road Administration said. Eastern parts of the country will see scattered rain or sleet. Temperatures throughout the day will remain around...
Last weekend, Christmas Eve as well as Christmas Day and Boxing Day still ahead means that most chemist's shops are closed for five days in a row. Tallinners can still get hold of prescription as well as over-the-counter drugs in the 5 Tõnismägi St and 19 Vikerlase St shops. As doctors' practices are closed for the holidays as well, people will have to turn to the emergency room of a nearby hospital in case of any more serious health problems. In Tallinn,...
Irene Ilves, the mother of former President Toomas Hendrik Ilves, died on Tuesday aged 91. Irene Ilves was born on 6 January 1927. An Estonian refugee, she raised her family in New Jersey, on the US East Coast. She is survived by two sons, Andres Eerik and Toomas Hendrik, and four grandchildren, Juulia Kristiine, Luukas Kristjan, Kadri Keiu and Hans Hendrik, Mr Ilves wrote on social media on Wednesday, adding that she will be very missed by family and frie...