Moody's: Lithuania still vulnerable

In its annual report on Lithuania, Moody's Investors Service said the country's A2 foreign- and local-currency government bond ratings balance a strengthening in the country's public finances and policy framework against growing external vulnerabilities, particularly the large current account deficit and rising external debt ratios.

The bond rating, along with Moody's assessment of a very low risk of a payments moratorium in the event of a government default, serves as the basis for Lithuania's Aa1 foreign-currency country ceiling for bonds.

Distinct improvements in fiscal policy and structural reforms, including reform of taxes, municipal finance, social security and healthcare, have led to a gradual reduction in government debt relative to GDP and revenues, Moody's said.

Despite these improvements, the agency said, Lithuania remains one of the weaker European Union-10 members, as evidenced by lower real per capita income, lower levels of government revenues and less foreign investment as a percentage of GDP.

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