Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews of an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Estonia (AA-/Stable; S-1+/Stable) on 13 January 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

Estonia’s AA- rating is underpinned by i) a track record of prudent fiscal management supporting low public debt levels; ii) strong governance and commitment to a favourable business environment, underpinned by EU and euro area membership; and iii) improved resilience against external shocks, with falling levels of net external liabilities. The government adopted a large fiscal package to mitigate adverse economic effects from the Covid-19 shock, which alongside the cyclical fiscal deterioration cause the general government debt-to-GDP ratio to increase, nevertheless remaining lower than that of sovereign peers. In addition, Estonia benefits from favourable financing conditions. Challenges relate to i) still moderate per capita income levels relative to those of euro area peers, and moderate productivity growth; and ii) limited economic diversification together with a large export sector relative to the small size of the economy, which exposes Estonia to external shocks. Scope expects broad policy continuity under the next government, including strong support for Estonia’s EU, euro area and NATO memberships, as well as a continued commitment to maintaining Estonia’s sound public finances following the pandemic.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Levon Kameryan, Analyst.
The final ratings were first released by Scope on 12 September 2016.

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