Credit rating agency Standard & Poor's upgraded eurozone newcomer Estonia on Tuesday, highlighting stable finances and strong growth prospects as the country recovers from a sharp economic slump. In a statement, Standard & Poor's said it had raised Estonia's long-term sovereign credit rating to 'AA-' from 'A'. "At the same time, we raised the 'A-1' short-term ratings to 'A-1+'. The outlook is stable," S&P said.
"The upgrade reflects what we view as Estonia's consensus-driven policy framework, economic flexibility, transparent and productive public sector, sound fiscal management, and strong economic growth prospects," the global ratings agency said. "We expect policy to remain predictable, prudent, and supportive of growth over the ratings horizon," it added. The former Soviet-ruled nation of 1.3 million, which joined the European Union in 2004, has a reputation for conservative fiscal policies. Public finances have repeatedly been in surplus and in 2010, the country had the lowest debt level in the European Union at 6.6 percent of gross domestic product. Estonia won a reputation as a "tiger" thanks to its leap from communism to a hi-tech driven free market after independence from Moscow in 1991. It posted average annual growth of 8.4 percent from 2000 to 2007.
But it was battered by the global financial crisis. After a 3.6-percent contraction in 2008, its economy shrank by 14.1 percent in 2009, one of the deepest slumps in the world. Estonia's GDP increased by 3.1 percent in 2010 compared with 2009. This year's official forecast is 6.3 percent.