Fitch upgrades Lithuania, rates bond A

Fitch Ratings said it upgraded the Republic of Lithuania's foreign-currency issuer default rating to A from A-, local-currency issuer default rating to A+ from A, country ceiling to AA from AA- and short-term foreign-currency rating to F1 from F2.

The agency also assigned an A rating to the country's forthcoming €600 million bonds due 2012.

The outlook is stable.

The upgrade was driven by strong economic growth and real convergence with Western Europe, coupled with fiscal discipline and low government debt levels, the agency said. Lithuania's real GDP growth has averaged almost 8% in the past five years, and per capita GDP has increased to 52% of the European Union average in 2005 from 38% in 2000, higher than both Latvia and Poland. And at less than 20% of GDP, low government debt levels compare favorably with the A range median of 32%.

Fitch noted, however, that Lithuania's external finances do not compare favorably to the A range median, although they are stronger than those of its Baltic neighbors. In particular, official reserves are equivalent to 2.5 months of imports and the liquidity ratio is 73%, compared with the A range median of 3.9 months and 131%, respectively.

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