"Latvia's economy is performing solidly even amid the COVID-19 pandemic, supported primarily by policy actions and steady exports. From 2022 onward, investments using funds from the European Union (EU) will boost the economy. Given the country's strong social and economic institutions including a favorable business climate, the economy is expected to maintain high growth over the medium term. Despite a worsening of the fiscal position, the government debt ratio stays low. As the government continues disciplined policy management, its fiscal situation will likely improve with the termination of support measures.
"Based on this view, along with the fact that the financial system remains stable, R&I has affirmed the Foreign Currency Issuer Rating at A. R&I will consider upgrading the rating if the pandemic-induced uncertainty about the future is dispelled and robust economic fundamentals and stable policy management are retained," R&I said.
The agency noted that demographic trends continue to pose a threat to future growth.
"The EC forecasts a sharp population decrease due to ongoing outflow to other countries, not just a natural decline. A continued population decrease could weaken economic growth. Ample funds coming from the EU over the next few years will provide great opportunities to strengthen economic growth and address population and other issues. R&I considers that the government has a strong policy management capacity that allows it to formulate and implement effective policy measures. Eyes are on the government's efforts to eliminate the impact of the pandemic and improve economic and social issues," R&I said.
The agency published its previous Latvian credit rating statement on January 25, 2021, when it affirmed Latvia's credit rating at “A” level with stable outlook.
The full summary can be found at the R&I website.
