Fitch Ratings raised Estonia's long-term foreign- and local-currency issuer default ratings to AA- from A+ with a stable outlook.

The rating agency said the country's external position has strengthened, driven by current account surpluses and continued external private sector deleveraging. The improvement supports a strong net external creditor position for Estonia and mitigates potential vulnerability to external shocks owing to its small size and open economy, Fitch added.

Estonia's track record of prudent fiscal management within a credible fiscal framework has kept public finances a key rating strength for the country, according to Fitch. It expects the country's low public debt ratio to fall further over the medium term.

The debt watcher expects an average current account surplus of 2.7% of the country's GDP, which is in line with the projected median surplus of other AA-rated countries. Estonia is also expected to run fiscal surpluses of 0.5% of GDP this year and 0.3% in 2019, compared to a 0.3% deficit last year.

Meanwhile, Estonia's sound policies have strengthened its economic fundamentals, which boosted GDP growth and raised income levels. The rating agency said it expects GDP expansion of 3.6% this year and 3.1% in 2019.