• Economic flexibility, resilience and adaptability
• Lower, albeit rising, government debt-to-GDP ratio and lower debt servicing costs compared to rating peers
• A strong track record of prudent fiscal policy and robust institutions
• Credible economic policy framework supported by EU and eurozone membership
• Moderate level of private sector indebtedness
Latvia’s geopolitical risks to remain elevated, though these are mitigated by its NATO membership, the permanent stationing of NATO troops in Latvia, and strengthening defense capabilities.
Significant increase in defense spending will not materially weaken Latvia’s credit profile over the medium term, even though debt-to-GDP is expected to risefrom moderate levels, given expectation of robust economic growth and overall continued prudent fiscal policy.
The balance between Latvia's rising debt and rebounding economic growth and expectation that Latvia will withstand external headwinds over the next two years, including from the Russia-Ukraine conflict.
Latvia's authorities will preserve the country's prudent fiscal policy, taking enough policy measures to ultimately keep budget deficits and government debt in check, despite the planned defense spending increases over 2026-2027.
Expectation that the war will not spread to NATO territory, including Latvia.
