Fitch Raised Estonia’s Credit Rating to A
Besides the fears that some experts may have, Fitch Ratings Inc, an international credit rating agency, decided to increase Estonia´s credit worthiness. And the reason is the incorporation of Estonia in the EU common currency area.
Estonia’s entrance in the Eurozone was made official on the 13rd of July when economic ministers of the EU gave green light to the country for switching the euro on the first of January, 2011.
The Baltic state will be then the seventeenth member of the euro zone on the ground that meets the criteria of economic convergence despite the current crisis.
And one week after the decision, some good news are starting to arrive to Estonia.
The incorporation in the Euro area “improves Estonia´s risk profile”. That is what Mr Douglas Renwick, associate director of the agency thinks.
Renwick also remarked that the risks associated to the foreign debt will be reduced. The “rating” has been change from “BBB+” (which means medium class, satisfactory at the moment) to “A” with a perspective of stability during the upcoming years.
Fitch Ratings considers that adopting the Euro will significantly reduce external financing and the foreign currency risks associated with this high level of debt.
But, on the other hand, the rating agency warns that Estonia is going to became the poorest member of the Euro zone.
However and according to the agency, its prospects for a long-term growth are better than the average of the other members.
The national economy and public finance has been described as the strongest in the European Union, and have a proven history of fiscal conservatism, as evidenced by the government deficit and public debt in 2009.
They represent 1.7% GDP and 7.2% GDP respectively, which is the lowest level of the EU. However, the Baltic Country economy has been more “volatile” than any other country in the Euro.
The fixed exchange rate for one euro is EEK 15.6466. It corresponds to the current central rate of the Estonian kroon in the mechanism of change in the EU.
