S&P Global Ratings re-affirms Latvia’s credit rating
Agency outlines Latvia’s strong balanced growth and it`s forecasts that economic growth will remain to 3% on average over the next years. Latvia’s public finances continues to support the current rating, given that Latvia has one of the lowest general government debt ratios in the European Union as well as balanced fiscal policy that results in moderate budget deficit. Despite the long government formation process after the election in October 2018 and the political fragmentation in Latvia’s party system agency expects that the government will ensure policy continuity.
S&P Global Ratings notes that the liquidation of ABLV Bank as well as the significant outflow of non-residents deposit’s from the banking sector did not impact the stability of financial sector and it does not have fiscal impact on Latvia’s economy. In S&P Global Rating view decrease in non-residents deposits in Latvian banking sector reduces external risks, for example, short-term external debt. Agency expects the new government will continue to implement the recommendations of the Council of Europe’s Moneyval report.
Agency could take a negative rating action if risks related to the non-residents deposit banking sector’s legacy, such as additional AML breaches or resulting from the unwinding of non-resident deposits positions started to materialize. Similarly, agency would react if economic growth fell significantly or negative changes in fiscal policy would occur.
Agency could rise the rating if economic growth, general government debt or fiscal performance exceeded agency’s forecast.
The previous credit rating agencies S&P Global Ratings announcement was published on September 21, 2018, when agency upgraded Latvia’s credit rating from ‘A-’ to ‘A’ with a stable outlook.
Full press release in S&P Global Ratings homepage (registration required).