Analytics, Economics, Financial Services, Investments, Latvia, Rating

Latvia's economic growth is expected to accelerate to 3.2% in 2016 thanks to a revival in economic sentiment and faster growth in the euro area, Moody’s said.

Moody’s expects a government budget deficit of around 1.5% of gross domestic product in this year and in 2016 as fiscal consolidation remains in focus, and Latvia's general government debt-to-GDP ratio to remain around 40% in 2016.

Moody’s views non-resident deposits as the main, albeit modest, risk in the banking system. However, it notes that the share of non-resident deposits has stabilized at around a half of total banking sector deposits, and banks that focus on non-resident business are subject to stricter capital and liquidity requirements from the regulator.

As reported, in mid-February Moody’s upgraded the government bond ratings of Latvia to "A3" from "Baa1". The outlook on the rating is stable, the ratings agency said.