Fitch keeps Latvia at 'A-', outlook stable

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Rating agency Fitch provied a fairly upbeat assessment of Latvia's economic outlook September 3 in maintaining its current 'A-' rating of the country and reaffirming a stable outlook while increasing its 2021 GDP growth projection from 3 % to 4 %.   

"The Stable Outlook reflects a degree of confidence that the economy will remain resilient to the ongoing coronavirus pandemic risks and that the authorities will implement policies that are consistent with the long-term sustainability of the public finances," Fitch said.

"Fitch now expects GDP growth of 4% in 2021 (versus 3% at our previous review) thanks to a stronger performance in 2Q21 than previously expected.

"Economic output is already above pre-2019 levels (by comparison it took six years for it to recover following the global financial crisis), reflecting a recovery in consumer and investment demand, as well as continued strong performance in export-focussed manufacturing industries. Government support measures have been instrumental in preventing significant labour market scarring, although sectors such as accommodation and transport are highly likely to suffer permanent losses," it added.

Inflation is likely to pick up until the middle of 2022, and labor shortages combined with rising wages may "create some risks of overheating," the agency warned.

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