Analytics, Investments, Latvia, Rating
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Friday, 29.03.2024, 00:57
Fitch affirms Latvia's ratings at "A-"
Latvia's ratings are supported by its favorable fiscal position, low government debt ratio and economic growth, where real gross domestic product is forecast by Fitch to grow broadly at potential of 3% in 2016-2017, bringing Latvia in line with the "A" median.
Stable and improving banking sector in Latvia is also supportive factor for Latvia's ratings. The banking sector is well capitalized and ongoing private sector deleveraging has helped improve banks' balance sheets.
According to Fitch, a risk factor to Latvia's banks is the large presence of non-resident deposits (NRDs), however NRDs have stayed relatively stable in 2015.
The low level of income per capita constrains Latvia's ratings. Structural rigidities in the economy (including high unemployment) hamper the economy's growth potential. Latvia's net external debtor position stands out as a weakness against the median net creditor position. Fitch forecasts that ongoing private sector deleveraging, future reduction in sovereign debt and modest equity FDI inflows should help gradually bring down Latvia's external liabilities as a share of GDP.