Fitch affirms Lithuania

Fitch Ratings said it affirmed the Republic of Lithuania's long-term A- foreign and A local currency issuer default ratings, F2 short-term foreign currency issuer default rating and A+ country ceiling.

The outlook on the long-term foreign currency rating remains positive, while that on the local currency rating is stable.

The Lithuanian economy continues to grow rapidly, driving steady real convergence of living standards with Western Europe. Fitch estimated that GDP growth was 7% in 2005 and has averaged 7.5% over the past five years. This track record reflects a good business climate, strong investment and productivity growth and successive governments' commitment to market-based economic reforms.

The ratings are also underpinned by strong public finances. Fitch estimated the budget deficit was just 1.2% of GDP last year and general government debt was just 19.4% of GDP. The Lithuanian political consensus in favor of sound macroeconomic policy management is strong, despite intermittently fractious and heavily personalized politics, the agency said.

The positive outlook on Lithuania's long-term foreign currency rating is supported by the prospects for the country's adoption of the euro, although the timing of this has become less certain during the past year, owing to a pick up in inflation. Fitch said the country will comfortably meet the other Maastricht criteria.

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