Latvia’s credit rating from S&P Global remains at A Stable
The report expresses the agency`s view that sovereign credit rating on Latvia is supported by generally effective economic policymaking, solid external balance sheet, and moderate government debt. S&P expects broad policy continuity, with national security as a key medium-term priority while benefiting from Latvia`s membership in the EU, the euro area, and NATO.
The stable outlook reflects agency`s expectation that the Russia-Ukraine war will not spread to the territory of NATO members, including Latvia, which has been a member since 2004. The stable outlook takes into account medium-term risks to Latvia's budgetary, growth, and balance-of-payments performance as a result of regional geopolitical developments. These risks are, however, balanced by a projected cyclical economic recovery on the back of stronger domestic and foreign demand, and looser monetary policy. S&P believes Latvia's authorities will preserve prudent fiscal policy, taking enough policy measures to keep budget deficits in check and limit the increase in debt.
According to the agency`s forecast, Latvia`s general government deficit in 2024 will reach 3.0% of GDP, with a moderate widening to 3.5% of GDP in 2025 due to additional public spending on defence and security, further increase of public investments and possible lower revenues due to subdued economic activity. Spending on security and defence will remain a key priority, while sizable EU transfers and manageable public debt provide effective buffers to the near-term budgetary pressures.
S&P also mentions that Latvia's economy has weathered the initial impact of the Russia-Ukraine war, but the agency does not expect Latvia to return to pre-pandemic economic growth rates over the medium term, given the pressures on its external competitiveness and persistent geopolitical uncertainty. S&P forecasts Latvia's real GDP growth will reach 2.5% in 2025, supported by a rebound in private consumption and strengthening investments (both public and private) in an environment of gradually receding interest rates. In tandem with returning exports and rebounding domestic demand, S&P projects GDP growth will hold steady over 2026-2027, averaging 2.6% annually.
S&P published previous assessment on May 31, 2024, when credit rating of Latvia was lowered from A+ (negative outlook) to A (stable outlook).
Full announcement text is available on the S&P Global Ratings official web page (registration necessary).