Economics, Good for Business, Lithuania, Rating

R&I expects the Latvian economy to show continued growth, supported by strong domestic demand. The labor market remains strong and wages are showing steady growth.

Thanks to strict fiscal discipline, Latvia's budget deficit is reducing and the proportion of government debt against GDP remains low, the Japanese ratings agency said. 

While the share of nonresident banking services is contracting, resident services have become the main business of Latvian banks.

At the same time, R&I warns that the shrinking of Latvia's population is likely to bring about complications in the future as it can have a negative effect on social security and healthcare, as well as economic growth.

To lessen the impact of the demographic issues in the medium-term, R&I recommends raising productivity by carrying out structural reforms.