S&P cuts Estonia outlook to negative

Standard & Poor's said it revised its outlook on the Republic of Estonia to negative from stable, due to the heightened risk of a hard landing in response to rapidly increasing external imbalances.

At the same time, the long-term A and short-term A-1 sovereign credit ratings on the republic were affirmed, the agency said.

According to S&P, the ratings on Estonia continue to be supported by a strong record of fiscal control, a competitive economy and the prospect of EMU accession by 2012.

The ongoing surge in real wages and a rapid private sector credit growth have, however, contributed to strong domestic demand in 2006 and the first quarter of 2007, the agency added.

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