Estonia's rating is still supported by strong institutions and solid economic and fiscal policy, as well as EU and NATO membership, the agency said.

However, Estonia's credit could be affected by economic, financial or foreign effects associated with the conflict – the threat of recession could be more lasting.

The war has already left its mark on the Estonian economy, with inflation hitting 22.5 percent to affect household income and business investments.

S&P finds that European support offsets these effects in part. Estonia is looking at €6.7 billion in 2021-2027. Low unemployment, strong household savings and favorable fiscal policy are also seen as mitigating factors.

Estonia's average economic growth for 2024-2025 is forecast at 2.8 percent.

While Estonia's public debt will grow by 1.9 percent in 2022-2025 in the wake of defense spending, the need to help refugees and potentially lower tax receipt due to the recession, it will remain considerably lower than in many other European states.

S&P said that Estonia's rating could be lowered should effects of the conflict escalate to hit state finances, growth and competitive ability.

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