On July 5, the global credit rating agency Fitch Ratings upgraded Estonia's long-term foreign and local currency Issuer Default Ratings (IDR) from A to A+, and categorized its outlook at "stable."
“The upgrade reflects Estonia’s solid economic growth performance, exceptionally strong public finances, declining external debt ratios and signs of increasing stabilization in the banking sector,” Michele Napolitano, Associate Director in Fitch’s Sovereign Group, said in a company statement.
The agency also affirmed the country's short-term IDR at F1 and the Country Ceiling at AAA.
In its statement, Fitch pointed to fiscal policy as one of Estonia's key strengths, in particular the fact that the country's public debt is the lowest in the EU - 6.6 of GDP in 2010.
Although the recession was severe, Fitch said, Estonia is experiencing a "strong 'V-shaped' recovery" mainly driven by export and investment growth. This marks a key difference from the pre-crisis growth model, which was fueled by inflows of foreign capital in the non-tradable sector, according to the statement.
Fitch predicted that the country's GDP would increase by 4.8 percent and 4.2 percent in 2011 and 2012.
The agency said that economic volatility is still a rating weakness for the country, with growth fluctuating wildly in recent years and inflation rates high and volatile.