S&P Global Ratings re-affirms Latvia’s credit rating
In agency’s view economic growth will moderate at slightly below 3 % and remain resilient over the next years, At the same time external risks to the economic outlook remain but those are indirect.
S&P Global Ratings notes that the country’s public finances continue to support the current rating, including one of the lowest debt-to-ratios in European Union. Agency believes that in spite of high degree of fragmentation in government there will be policy continuity and fiscal deficit will narrow further, in the same time acknowledges there is limited space to expand spending in the health care and education sector and social expenditure while addressing reforms needed.
Agency outlines that a disruptive and disorderly Brexit could put pressure on the sizeable timber sector in the country but outlines that the impact on external trade and the whole economy will be insignificant.
In the report S&P Global Ratings draws particular attention to the financial sector of Latvia and notes that the Latvian authorities have made significant effort in regards to strengthening the regulatory framework regarding AML and financial crime prevention, increasing supervisory capabilities, reducing deposits of non-residents and implementing comprehensive reforms in financial sector. However, the agency notes that should the country be included on the FATF grey list, further reputational impairments for the broader Latvian financial sector cannot be ruled out and could bear implications for financial stability and negatively affect further growth of Latvian economy.
Agency could rise the rating if fiscal results exceeded agency’s forecast but could take a negative rating action if significant and tangible pressures built on the financial system potentially affecting financial stability or the economic outlook will be observed.
The previous credit rating agency’s S&P Global Ratings announcement was published on March 22, 2019, when agency affirmed Latvia’s credit rating in ‘A’ with a stable outlook.
Full press release in S&P Global Ratings homepage (registration required).