According to Moody's, the Latvian credit rating, set at A3 level, is supported by three key factors - the flexible and relatively diversified Latvian economy, the moderate level of Latvian government debt and effective policy making.
The Agency forecasts that the COVID-19 pandemic will cause a sharp fall in Latvia's GDP this year, by 7.3%, which will also have a significant negative impact on the country's financial position.
The budget deficit is expected to reach 9.8% of GDP this year, while the government debt burden will rise by 12.4 percentage points, but remain moderate and in line with the “A” level credit rating.
Moody's estimates that Latvia's economy will recover gradually from the second half of this year, but will return to growth of 4.7% next year.
Although the money laundering and corruption scandals in 2018 raised concerns about the quality and integrity of financial supervision, the Latvian government has shown significant progress in these areas since then, reports the Agency.
