Fitch Ratings affirms Latvia`s credit rating at A- with stable outlook
According to Fitch`s view Latvia's rating level reflects a credible policy framework, supported by EU and eurozone membership, and lower, albeit rising, government debt and debt servicing costs than rating peers. These strengths are balanced by Latvia's heightened exposure to geopolitical risks, small economy, lower GDP per capita relative to 'A' peers.
The Stable Outlook reflects Fitch's assumption that Russia-related security risks will remain broadly unchanged and an expectation that stronger nominal GDP growth and expected fiscal adjustment will stabilise public debt/GDP below the peer median over the medium term, despite a commitment to maintaining high defence spending.
Fitch expects the general government deficit to remain below 3% of GDP in 2026, before widening to about 5% by 2028, above the forecast ‘A’ median of 3.1%, and declining thereafter. Higher defence spending will be the main driver, alongside other expenditure, including debt-servicing costs.
Fitch assumes that the next government remains committed to EU fiscal rules and will implement fiscal adjustment after 2028, when the national escape clause expires. Fitch expects broad policy continuity on fiscal policy, planned defence spending, EU and NATO alignment, and relations with Russia and Ukraine.
Fitch forecasts general government debt will increase to 52.2% of GDP in 2028, from 46.2% at end-2025, but remain below the forecast of ‘A’ median - 58.3%. Debt to GDP will likely stabilise in 2030 following fiscal consolidation and as defence spending starts to ease.
The economy grew by 2.4% in 2025, up from 0.5% in 2024, supported by strong public investment, improving private investment and a gradual recovery in household consumption and exports. Fitch forecasts growth of 2.7% in 2026, revised up from 2.3% at the April review, and an average 2.4% in 2027-2028, broadly in line with 'A' median, and points out that public investments will remain the main growth driver.
Fitch Ratings published previous assessment of Latvia’s credit rating on April 24, 2026, when rating was affirmed at "A-" with stable outlook.
The full publication is available on the Fitch Ratings website (https://www.fitchratings.com/).