Fitch downgrades Baltic states

Fitch Ratings said it downgraded the long-term foreign- and local-currency issuer default ratings and country ceilings of Estonia, Latvia and Lithuania by one notch.

Estonia's long-term foreign-currency issuer default rating was downgraded to A- from A, long-term local-currency issuer default rating to A from A+, short-term foreign-currency issuer default rating was affirmed at F1, and its country ceiling was downgraded to AA- from AA.

Latvia's long-term foreign-currency issuer default rating was downgraded to BBB from BBB+, long-term local-currency issuer default rating to BBB+ from A-, short-term foreign-currency issuer default rating to F3 from F2 and country ceiling to A from A+.

Lithuania's long-term foreign-currency issuer default rating was downgraded to A- from A, long-term local-currency issuer default rating to A from A+, short-term foreign-currency issuer default rating at F1 and country ceiling downgraded to AA- from AA.

The outlooks remain negative.

The downgrade reflects the risk that the deterioration in the European economic and financial environment will impose a costly macroeconomic adjustment in the Baltic countries, given their large bank-financed current account deficits, Fitch said.

The further deterioration in global and, especially European, financial conditions and the likelihood of recession in the euro area have heightened the risks for economies with large external financing needs and reliance on bank financing, the agency said.

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