Sweden’s Rating Unchanged, Lithuania Upgraded

Standard & Poor’s maintained the sovereign ratings of Sweden at ‘AAA’ with ‘stable’ outlook and upgraded Lithuania’s rating outlook to positive.

The agency said Sweden benefits from high institutional effectiveness, substantial fiscal buffers and ample monetary policy flexibility, RTTNews reported.

The stable outlook reflects the assessment that over the next two years, Sweden’s key fiscal, external, economic and monetary metrics will remain among the strongest of the 131 sovereigns rated by S&P.

Despite political fragmentation, S&P expects the Swedish government to maintain fiscal discipline and to pay down public debt. The transparent institutional setting and robust economic fundamentals cushion uncertainties from prospects of snap elections or re-formation of government, the agency said.

According to S&P, Sweden’s booming economy is set to motor on at a strong pace through 2017-2018, while high household debt continues to loom as a key risk.

As growth in house prices has exceeded that of disposable income and inflation, a house price correction could lead to a marked reduction in consumption, hampering Sweden’s economic performance and burdening the financial sector, S&P said.

In a separate communique, S&P said the outlook on Lithuania’s rating was revised to positive from stable on expectations that Lithuania’s economy will post strong balanced growth over the medium term.

The ‘A-’ ratings on Lithuania reflect the country’s economic prospects over the next two years, although it has one of the lowest GDP per capita ratios in the eurozone.

S&P expects Lithuania’s open economy to perform well, fueled by firming exports, rising consumption and strong investment activity, supported by new EU financing cycle.