International rating agency Fitch upgraded Estonia's ratings - comments by the Estonian central bank

On 28 September, Fitch, the international rating agency, upgraded Estonia's ratings: long-term foreign currency rating to 'BBB+' ('BBB' earlier) and short-term foreign currency rating to 'F2' ('F3' earlier). The long-term kroon rating remains unchanged at 'A'. The outlook for all three ratings is now stable. The full text of the press release of Fitch is available at

'BBB+' is the highest of Fitch's investment grade ratings of category 'BBB' (good credit quality) which is followed by the ratings of category 'A' (high credit quality). Fitch has attributed 'BBB' rating to Poland, the Czech Republic and Hungary, i.e. to the countries belonging to an economic region comparable with Estonia. A rating 'A' has been given to Slovenia, 'A-' to Greece, 'BBB' to Latvia and 'BB+' to Slovakia and Lithuania. A description of Fitch's rating methodology and a full list of ratings can be obtained via the internet address

The differences between Fitch's analysis of the Estonian economy and the views of Eesti Pank are rather insignificant. The central bank is happy to note that an independent rating agency has attributed a favourable overall assessment to the Estonian economy. However, there is no reason to be too self-satisfied.

Eesti Pank holds the view that in order to achieve a sustainable and rapid economic growth it is necessary:

  • To achieve, as the mean of the forthcoming years, a balance between the revenue and expenditure, which means that, economic growth accelerating, one has to take into consideration a budget with a surplus.
  • To avoid any significant growth of the current account deficit and guarantee the financing of the deficit mostly by direct investments and other long-term and stable currency flows; to support a higher level of domestic saving.
  • To accomplish restructuring and privatisation of both state and local infrastructural enterprises. To continue structural reforms in their most broad sense, with a view to creating as favourable an investment climate as possible. Only this way investments into Estonia could have the objective of setting up technologically highly developed industries (Fitch's positive stand to the changes that have taken place in the structure of economy refers, rather, to a probability or a beginning of such a process).


In its press release Fitch stresses the following tendencies:

  • The outlook for economic growth is good, the consequences of the Asian and Russian crises have been surmounted, structural changes of the economy have been favourable: with the decline of heavy industry and a growth in the sectors where Estonia has a natural advantage. In addition, new high-technology industries have seen a rapid development. Foreign trade has been reoriented towards the European Union.
  • Notwithstanding a 4.6% fiscal deficit, economic policies, in general, have remained favourble to development and steady progress has been made with structural reforms.
  • Problems related to the banking sector and the external accounts (current account deficit) which constrained the rating when it was first assigned in 1997, have been dealt with. The current account deficit has decreased by more than 50% in 1999.
  • Following the sale of Optiva Pank, the banking sector is now 98% foreign-owned. This sale, along with improved regulation, has strengthened the quality of bank management. Compliance with Basle core principles is good and vulnerabilities within the sector have been considerably reduced.


Despite the progress made, the rating agency lists several problems:

  • Given the importance of maintaining the current account balance, it is essential that credit growth remain under control;
  • Over the long term, there is a serious need to tackle the environmental damage caused by extensive oil shale mining;
  • To reduce high unemployment;
  • To level wide regional inequalities;
  • To complete reforms necessary for EU membership;
  • Given the importance of transit trade for Estonia, the continuing difficulties in normalising relations with Russia is a disappointment.


The change in Estonia's sovereign rating has had an impact on the ratings assigned to Eesti Ühispank by Fitch. These ratings have been upgraded to 'BBB+' and 'F2'.

Public Relations Department