Analytics, Economics, Lithuania

The Baltic country's ratings are "under review for possible downgrade since the severe deterioration in the macroeconomic environment could structurally impair the country's economic model," said Orchard, in a credit report.

Europe's emerging economies have been battered by the global financial crisis, which cut demand for their exports while shutting off investment and credit. Lithuania may see borrowing costs rise for the government and debt levels and deficits increase, Orchard said in the report.

"The government's access to the international capital markets is clearly impaired in the current environment," he said. "Additional borrowing may be necessary to ease pressure on the balance of payments and to support locally owned banks."

Nordic banks are likely to provide support for their subsidiaries in Lithuania, he said. The country would also receive financing support for its currency from the International Monetary Fund and the European Union, should that be needed, reports Bloomberg/ELTA.

"A devaluation can no longer be ruled out in the current environment, but this is not Moody's central scenario," he said "Low refinancing needs and emergency funding would likely allow the government's rating to remain in the low investment grade range, even if a devaluation was to occur," he added.

The credit report is an annual update, and not a formal action, Moody's said.