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VILNIUS, Mar 31, BNS - Moody's Investors Service on Wednesday raised the outlook on the Lithuanian government's Baa1 long-term debt rating to stable from negative. The agency said in a press release that the outlook upgrade reflected "the relatively rapid stabilization of the economy and decline in financial stress across the region." "The Lithuanian economy has stabilized more quickly than previously anticipated, and also faster than the other Baltic countries," said Kenneth Orchard, Vice-President/Senior Credit Officer in Moody's Sovereign Risk Group.

"After an incredibly sharp downturn beginning in mid-2008, the recession apparently ended as early as the third quarter of 2009. This development is expected to have a modestly positive impact on government financial strength through slightly lower budget deficits and less rapid increase in debt," he said.

However, the analyst warned that the government's plans to reduce the budget deficit below 3 percent of GDP by 2012 could be "overly ambitious in the current economic environment."

He pointed out that Lithuania had benefited from the decline in financial stress across the region. Orchard also emphasized that Lithuania was one of the few countries inthe EU that did not have to support its banking sector in 2008 to 2009.

Moody's last rating action on Lithuania was in September 2009, when it downgraded the government's local and foreign currency ratings to Baa1 from A3 with a negative outlook.