Fitch Ratings agency has affirmed Latvia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘A-‘ with a Stable Outlook, the ratings agency informs.
Fitch cited Latvia’s solid public finances, as well as institutional resilience and reliable political structure ensured by members in the European Union and the euro area as the main factors supporting Latvia’s high credit rating.
Residents’ low income, as well as a higher instability of gross domestic product and external debt as compared to other countries with similar credit rating, were mentioned as Latvia’s main issues.
Fitch noted that the Latvian economy grew by 4.8% last year, recording the steepest growth in the last seven years. Latvia’s economic growth was driven primarily by strong investment activity in the second half of 2018 thanks to the absorption of EU funding. Fitch projected investment growth to slow down this and next year, which combined with weaker external demand is likely to have a negative impact on Latvia’s economic growth.
The ratings agency forecast Latvia’s GDP growth at 3.1% for this and next year. Fitch also expects Nordic banks to keep playing an important role in Latvia, while developments in the non-resident banking segment are not expected to have a significant effect on the banking sector.
