S&P Global Ratings upgraded Lithuania's long- and short-term foreign- and local-currency sovereign credit ratings to A/A-1 from A-/A-2, with a stable outlook, mainly reflecting strong economic expansion and robust growth prospects.
The rating agency expects the Eurozone-member country's growth to average 2.8% over the next four years given a favorable foreign trade environment, expanding domestic consumption and a pickup in the EU financing cycle.
However, S&P said an economic downturn in the Eurozone and the impact of adverse demographics represent risks. Rising wages will counter those pressures and retain workers in Lithuania, the rating agency added.
S&P also cited the country's strong fiscal performance and said it expects a gradual reduction in net general government debt toward 30% of GDP in 2021, and current account deficits remaining at a low level.
"Given the modest size of the domestic bond market, the share of general government debt held by nonresidents is likely to remain slightly above 70%," the rating agency said. "Consequently, we forecast the country's net international investment position will improve by close to 10% of GDP between 2017 and 2021," S&P added.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.
