Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Monitoring reviews are unrelated to the calendar that outlines public finance rating actions.

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 on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Estonia (AA-/Stable; S-1+/Stable) on 28 June 2021. 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 anchoring low public debt levels; ii) strong institutions and commitment to a favourable business environment, underpinned by EU and euro area membership; and iii) improved resilience against external shocks, with net external liabilities declining over the past years. In addition, Estonia benefits from favourable debt financing conditions. Challenges relate to i) still lower per capita income levels relative to those of euro area peers combined with 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 current 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.

The Stable Outlook represents Scope’s view that risks to the ratings over the next 12 to 18 months are balanced. The ratings/Outlooks could be upgraded if, individually or collectively: i) a continued implementation of structural reforms, such as in the labour market, research and development, and infrastructure, drives a stronger growth outlook; and/or ii) there is a further sustained reduction in external vulnerabilities.

Conversely, the ratings/Outlooks could be downgraded if, individually or collectively: i) the fiscal outlook deteriorates meaningfully; ii) risks in the financial sector escalate, increasing financial stability concerns; iii) external competitiveness declines weakening Estonia’s growth outlook; and/or iv) an external shock or heightened geopolitical risks undermine Estonia’s macro-economic stability.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (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, Senior Analyst

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