Moody's cuts Lithuania

Moody's Investors Service said it downgraded the foreign- and local-currency ratings of the government of Lithuania to A3 from A2, along with its short-term rating to prime-2 from prime-1. This concludes a review that began in February.

The outlook is negative.

The downgrade was prompted by the ongoing deterioration in economic activity that is expected to increase pressure on the government's liquidity position in the second half of 2009, Moody's said.

The sharp real contraction of the economy, which could be over 10% in 2009, is causing a decline in government revenues and enlarging the budget deficit, the agency said. The government's ability to borrow on the public capital markets is constrained, Moody's added.

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