Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's affirms Lithuania's A3 rating, outlook remains stable

Global Credit Research - 08 Sep 2017

London, 08 September 2017 -- Moody's Investors Service, ("Moody's") has today affirmed Government of Lithuania's A3 long-term issuer and senior unsecured ratings as well as the (P)A3 senior unsecured MTN program rating. Moody's has also affirmed Lithuania's (P)P-2 domestic currency short-term rating. The outlook remains stable.

The decision to affirm the ratings and maintain the stable outlook balances the following key rating factors:

(1) Lithuania's flexible economy, underpinned by a strong policy track record;

(2) Robust public finances, supported by prudent fiscal policy;

(3) Exposure to external shocks, particularly developments in the geopolitical environment.

Lithuania's long-term local and foreign-currency bond and deposit ceilings remain unchanged at Aaa. The short-term foreign currency bond and deposit ceilings remain unchanged at P-1.

RATINGS RATIONALE

FIRST DRIVER: LITHUANIA'S FLEXIBLE ECONOMY, UNDERPINNED BY STRONG POLICY TRACK RECORD

Lithuania's flexible economy and the implementation of sound policies allowed a strong post-crisis adjustment and supported the country's ability to withstand the trade shock emanating from Russia. Export performance remained relatively resilient, benefiting from the ability of Lithuanian exporters to diversify into new markets, including Middle Eastern countries. The resilience of Lithuania's economy has been also supported by the country's proactive stance in reducing its energy dependence from Russia, which in turn has helped to increase the energy security in the Baltic region. Lithuania has made significant progress in reforming its energy market and securing the supply of alternative sources while obtaining more competitive prices. The projects have extended across both the electricity and gas markets, most notably with the launch of the liquefied natural gas (LNG) terminal in the port city of Klaipeda in December 2014, and with the start of operations in December 2015 of the Nordbalt and LitPol Link interconnection links with Sweden and Poland, respectively.

Growth is gaining momentum and the medium-term economic outlook is favorable. Moody's expects real GDP to grow by 3.5% and 3.4% in 2017 and 2018 respectively, from 2.3% in 2016 on the back of continued robust private consumption. The economy will also benefit from a pick-up in investment driven by an acceleration in the allocation of EU funds under the 2014-20 programming period, for which Lithuania enjoyed one of the highest absorption rates under the previous programme. Exports are recovering, supported by improving external conditions, albeit the contribution to growth from net exports is expected to remain negative due to the increase in investment-related imports.

At the same time, the country's economic strength remains constrained by a number of factors. Specifically, Moody's expects structural challenges, including adverse demographic dynamics due to aging population and emigration as well as skill mismatch that limits domestic labour supply, to continue to weigh on competitiveness and on economic prospects in the medium and long term. The new Labour Code, aiming to increase the flexibility of labour relations, provides a step towards easing some of these pressures.

SECOND DRIVER: ROBUST PUBLIC FINANCES SUPPORTED BY PRUDENT FISCAL POLICY

The second driver of Moody's decision to affirm Lithuania's ratings is the strength of its public finances, which reflects the fiscal consolidation efforts and the expectation that the commitment to prudent budgeting supported by a credible fiscal framework will continue.

After recording the first surplus in its history in 2016, Lithuania's fiscal balance is expected to return to a small deficit in 2017, mainly reflecting the cost of structural reforms related to the labour market and pension system. The general government debt-to-GDP ratio stood at 40.2% of GDP at end-2016, in line with the median of its A-rated peers (40.7% of GDP in 2016, excluding Lithuania). Moody's projects the debt ratio will temporarily increase to 42.5% of GDP in 2017, mainly due to the pre-financing of 2018 Eurobond redemption, before declining to less than 39% of GDP in 2018.

At the same time, Lithuania's unexploited tax potential will continue to pose a challenge to fiscal flexibility. Lithuania's tax intake, at 29.1% of GDP in 2015, remains well below the EU average of around 40%. However, Moody's notes that, with aim to increase the tax intake to 32% of GDP in the medium term, the government has introduced a number of measures to improve tax administration and enhance tax collection.

Over the long term, costs associated with rapidly ageing population, one of the fastest in EU, will pose fiscal challenges. Adverse demographics will weigh on the sustainability of public finances. According to a study published by the European Commission (EC) in 2015, age-related spending is expected to add 3.7% of GDP to public spending by 2040. The EC also acknowledged that the pension measures that are part of the recent structural reforms package are likely to mitigate fiscal sustainability risks.

THIRD DRIVER: EXPOSURE TO EXTERNAL SHOCKS, PARTICULARLY DEVELOPMENTS IN THE GEOPOLITICAL ENVIRONMENT

The third driver of today's affirmation is Lithuania's vulnerability to external shocks, including the risks posed by the geopolitical environment.

Despite the demonstrated flexibility and resilience, as a small and open economy, Lithuania remains vulnerable to external shocks, including developments in the regional geopolitical landscape shaped by the relations with Russia. Moody's A3 rating takes into consideration the risk that Lithuania's credit profile could be affected in the event of a significant deterioration in the economic and/or security situation vis-à-vis Russia resulting in a persistent weakening of business confidence and trade disruption.

RATIONALE FOR STABLE OUTLOOK

The stable outlook balances Moody's view that the country's economic resilience will continue to be supported by sound economic policies and that the substantial fiscal consolidation over the recent years will be preserved, against the presence of structural challenges and geopolitical risk in the region.

WHAT COULD CHANGE THE RATING - UP

Much lower debt levels along with further progress in improving the government's fiscal flexibility, achieved for example through tax base-broadening measures, would exert upward pressure on the rating. Further progress on structural reforms which help to mitigate the effects of high youth emigration and the impact of a rapidly ageing population on the sustainability of public finances as well as structural reforms to boost competitiveness would also provide upward pressure. An easing of geopolitical risk in the region would also be credit positive.

WHAT COULD CHANGE THE RATING - DOWN

Conversely, a material deterioration in the public finances reversing the stabilization of the debt to GDP ratio, could exert downward pressure on the rating. Also, a severe escalation of geopolitical risk that would materially undermine Lithuania's economic and fiscal performance could trigger a rating downgrade.

GDP per capita (PPP basis, US$): 29,622 (2016 Actual) (also known as Per Capita Income)

Real GDP growth (% change): 2.3% (2016 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 1.7% (2016 Actual)

Gen. Gov. Financial Balance/GDP: 0.3% (2016 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -0.9% (2016 Actual) (also known as External Balance)

External debt/GDP: [not available]

Level of economic development: High level of economic resilience

Default history: No default events (on bonds or loans) have been recorded since 1983.

On 06 September 2017, a rating committee was called to discuss the rating of the Lithuania, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have not materially changed. The issuer's fiscal or financial strength, including its debt profile, has improved. The issuer is more susceptible to event risks.

The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Daniela Re Fraschini
Asst Vice President - Analyst
Sovereign Risk Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Yves Lemay
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.