Weaker public finances and the shock to economic growth, together with their potential impact on medium-term growth and fiscal dynamics, are the main channels through which the coronavirus pandemic can affect the sovereign credit ratings of the Baltic States, Fitch Ratings says in a new report.
However, the report notes that Estonia, Latvia and Lithuania are much better positioned to weather the current shock than they were during the global financial crisis; a period of multi-notch downgrades.
The economies of the three Baltic States are being hit hard by the pandemic. As small, open economies with relatively large transport sectors, they are vulnerable to the sharp fall in external demand, while domestic containment measures have hit household consumption, industrial production and what were until recently rapidly growing tourism sectors. However, the relatively quick easing of containment measures and fiscal stimulus packages have supported economic activity meaning the contractions in GDP