Dabar populiaru
Published: 17 april 2012 12:28

Investors see Lithuania's default probability receding

Photos.com nuotr. / Bankrotas

Financial markets estimate that the probability of Lithuania going bankrupt has halved in almost three years and the country is among the best performers in terms of the rate at which the risk decreased in the first quarter of this year, the business daily Verslo Žinios reports on Tuesday.

Economists say that Lithuania's image in the eyes of investors has improved due to both external and internal reasons. The external reasons include the European Central Bank's injections of billions of euros in the banking system at the end of last year and early this year and an easing of nervousness over the eurozone debt crisis.

"Among the external reasons, I'd mention the nationalization of Snoras. First, it was proved to investors that the (bank's) bankruptcy had no systematic risk and, second, part of the insurance money paid to Snoras' depositors went into Lithuanian bonds, thus pushing up the demand and price for the securities," the paper quotes Rokas Bancevičius, senior analyst at DNB Bankas.

Lithuania, which was among the world's top ten most risky sovereigns in 2009, is ranked 41st among 68 states in terms of default probability in CMA's sovereign risk report for the first quarter of this year.

The probability of Lithuania defaulting on its debt obligations in the next five years is currently 15.5 percent, down from 31 percent in mid-2009, according to the report.

In terms of the probability of default, which is based on the price of credit default swaps (CDS), Lithuania is now placed in the company of Latvia (15.5 percent), Turkey (15.1 percent) and Slovakia (14.3 percent), and is only several percentage points behind France (13.9 percent) or Austria (12.9 percent).

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