The Japanese credit rating agency R&I affirms Latvia's credit rating at A Stable
According to R&I, the main reason for rating affirmation is solid performance of the Latvian economy during the Covid-19 pandemic, supported by the policy actions implemented by the government, private consumption and stable exports.
Overall, despite the contraction in the Latvian economy at the beginning of the Covid-19 pandemic, growth has been recovering since early 2021, and economic growth indicators are projected to be high in the full year. Starting from 2022, investments from the European Union funds will boost economic development, and the agency expects that the Latvian economy will maintain high growth rates in the medium term.
The agency notes that despite fiscal stimulus affected by the Covid-19 support package, Latvia's general government debt ratio remains low compared to the euro area average and the interest payment expenses are declining. The agency points out that there are no particular problems with the government debt burden and tolerance. The agency expects that in 2023 and beyond, fiscal deficits will narrow, as a series of economic support packages will be terminated.
R&I continues to point out that Latvia's economic growth is constrained by an unfavourable demographic situation, which is affected by natural decline and emigration. The Agency believes that 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.
The agency published the previous Latvian credit rating statement on January 25, 2021, when affirmed Latvia's credit rating at “A” level with stable outlook.
Full publication can be found at the R&I website.