S&P affirms Lithuania

Standard & Poor's said it affirmed the A- long-term and A-2 short-term sovereign ratings on the Republic of Lithuania.

S&P said the outlook remains negative due to the continued risk of a hard landing for the Lithuanian economy, specifically a sharp economic slowdown that is substantial enough to reduce employment, increase private sector insolvencies and significantly worsen the public sector balance sheet.

The affirmation reflects expectation that the Lithuanian economy will slow down substantially during the second half of 2008 and 2009, the agency said, as domestic demand moderates and the economy readjusts to a more balanced growth path.

S&P said there have been some signs that the imbalances in the Lithuanian economy started to unwind in the first few months of 2008, including a slowing in the construction and housing sector, and a narrowing of the current account deficit.

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