On Friday, February 8, the Japanese Rating and Investment Information, Inc. (R&I) increased Latvia’s credit rating by one point, setting a stable outlook.
Latvia’s assessment in long-term obligations in foreign currency is increased from BBB- to BBB, as reported by the Finance Ministry.
“Having achieved a credit rating increase, we are happy to know that the Japanese rating agency continues to evaluate the work of the Latvian government and society in balancing economic growth. After all the work we’ve done, a credit rating increase is as though a prize and an opportunity for the country and businessmen to actively form international cooperation and expand the investor base. It also provides motivation to continue our work. The agency’s evaluation is also important because we plan to release Latvian state bonds on the Japanese market in a medium-term perspective, so that it would help us diversify the refinancing of our debt,” – says Finance Minister Andris Vilks.
The agency states in its report that Latvia’s economy recovered from the global financial crisis in the second half of 2010 and since then has continued to show balanced economic growth. The Latvian government’s plan for fiscal consolidation was carried out faster and more productive than it was planned to be. Economic development suggests that the economic instability caused by the financial crisis is settling down. The country’s fiscal and financial system is also stabilizing along with positive economic growth.
R&I notes that the general government debt, which increased rapidly during the global crisis, is decreasing in regard to GDP. According to the agency, the profitability of the banking sector is improving, even though the loan issue activity is still low.
The rating agency expects Latvia to join the European Economic and Monetary Union in 2014 and adopt Euro. Adoption of a new currency will stimulate Latvia’s economy. However, there are risks related to a strong flow of capital.
The report states that Latvia’s real GDP increased by more than 5% in 2012 and export increased as well. This was mostly due to stable economies of partner states. R&I explains the recovery of private consumption with the improving condition on the job market and the reduction of the debt burden of households. The government at the European Commission predict that the country’s GDP increase in 2013 will be 3.6%. R&I expects a 4% increase of Latvia’s economy after 2014.