S&P Global affirmed Latvia’s credit rating at A Stable
In the agency's opinion Latvia's rating level reflects track record of prudent policymaking and contained macroeconomic imbalances, characterized by moderate government and external leverage. Agency expects Latvian authorities to implement prudent fiscal policies to keep budget deficits and government debt in check. S&P Global thinks prudent policymaking will be maintained in the run-up to and following the October 2026 elections, when the new government will have to make key fiscal policy decisions to accommodate planned increased defence spending in the coming years. Agency notes that there is broad political consensus on key medium-term policy objectives, particularly foreign policy and on enhancing security and defence. S&P mentions that Latvia’s own defence efforts and its NATO cooperation help cushion spillover from security risks.
According to the agency`s view the stable outlook reflects the balance between Latvia's broadly resilient economy and rising debt and mirrors S&P expectation that the country will withstand external headwinds over the next two years, including near-term spillover effects from the Middle East war and persistent risks from the Russia-Ukraine conflict.
S&P projects an expansion in Latvia’s economy by 2.0% in 2026, accelerating to an average of 2.4% over 2027-2029. Agency notes that public investment in infrastructure and defence and robust real wage growth underpin domestic demand, while the energy price shock triggered by the Middle East war will drive up inflation and could weigh on export demand. The Latvian economy expanded by 2.1% in 2025 and domestic demand remained resilient in early 2026, reflected by strong retail sales data and double-digit loan growth. S&P notes that public investment growth is driven by the EU’s Recovery and Resilience Facility (RRF), rising defence investments, and the Rail Baltica-a key regional infrastructure project.
S&P projects that Latvia’s general government deficit will widen to more than 4.0% of GDP by 2028 from 2.5% in 2025, mainly driven by defence spending expanding toward 5.0% of GDP. Agency expects the new government to address rising deficits to maintain fiscal prudence and projects that the general government deficit will decrease from 2029. S&P notes that fiscal policy framework is underpinned by a firm commitment to maintaining gross debt below 55% of GDP, which would still be moderate in an international comparison.
S&P published previous assessment on November 28, 2025, when credit rating of Latvia remained at A Stable. Full announcement text is available on the S&P Global Ratings official web page (registration necessary).