The credit rating agency S&P Global Ratings affirms Latvia's credit rating at the high "A+" level
Agency says that the economic contraction in 2020 has been less harsh on Latvia than on many other countries. Thanks to government taken support measures to mitigate Covid-19 impact, agency expects that economic recovery will start in mid-2021. In turn, the economic recovery will have a positive impact on fiscal performance.
Agency points out, that strong credit fundamentals and fiscal policy, along with monetary policy support from the EU, will allow Latvia to withstand the ongoing wave of Covid-19 and put net general government debt on a declining path starting in 2022. Another element that will support Latvia's medium- and long-term economic development is the new EU budget.
In the long term, agency could take a positive rating action on Latvia if, after the pandemic recedes, economic growth rates consistently exceed those of peers, while fiscal balances continue to narrow, putting net general government debt as a share of GDP on a firm downward trend. Notwithstanding the increase of high wage and record low unemployment rates, agency notes that in the long-term labor market will become a primary constraint to economic development in the medium term, as it is due to shrink of working-age population and decline of the demographic gap.
Although Latvia's political party system remains highly fragmented and unstable, it does not appear to have inhibited an effective policy response to the pandemic.
The previous credit rating agency’s S&P Global Rating announcement was published on August 21, 2020, when agency affirmed Latvia's rating at the high "A+" level with the stable outlook
Full announcement is in the S&P Global Ratings official web page (registration necessary).
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