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Ceturtdiena 17.08.2017 | Name days: Oļegs, Vineta
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Latvia’s credit rating returns to its pre-crisis level

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis Monday, May 30th, Standard & Poor’s agency upgraded Latvia’s credit rating from BBB+ to A-, returning it to its pre-crisis level.

S&P explains its decision with Latvia’s strong long-term economic growth, better-than-expected external performance and careful fiscal policy.

It is mentioned in the agency’s report that Latvia’s economy was the most rapidly growing one among European countries with a 4.1% growth in 2013. The agency expects Latvia’s economy to grow 3.7% in 2014, which may then stabilize at 4.3% in 2015-2017. The agency also notes accomplishments in deficit reduction and improvements in fiscal measures, which is mostly thanks to the adoption of the Fiscal Discipline Law.

Future outlook is stable, because positive accomplishments are reduced be separate external risks. A stable outlook also means that the agency does not see a high probability for any significant changes in the next couple of years. The agency may decide to downgrade the rating of the government derails the fiscal discipline course or if there is significant growth in risks for non-residents’ deposits.

‘It is a great accomplishment for our country. I was achieved through gradual and consecutive work in favour of the country’s economy, which has now been praised by one of the largest rating agencies in the world. Latvia’s inclusion on the list of A Group states means high praise. This also presents us with higher expectations and challenges for the future. It is an opportunity for us to demonstrate our compliance with expectations from countries of this group. This should be kept in mind by other Latvian politicians in all levels – state, municipal and private sector representatives. This is especially important given the upcoming Saeima elections,’ – says Latvian Finance Minister Andris Vilks.

Meanwhile, Swedbank senior economist Lija Strasuna notes Latvia’s rating has returned to its pre-crisis level. It is the highest rating Latvia has ever held.

‘Latvia’ rating is now on-par with that of Lithuania (its rating was upgraded this April) and three levels lower than that of Estonia. Poland also has A- rating. Ratings of Spain and Italy are lower than that,’ – says the economist.

According to her, an upgrade of Latvia’s rating was expected. It may be possible that it is a bit late, too. ‘I think we should have had our rating upgraded some time ago. The difference in ratings with Estonia remains too big. With that, if there are no unpleasant surprises, Latvia’s rating may grow even more. Although slowed, economic growth remains solid and balanced. Inflation remains low and state finances are in good standing,’ – says Strasuna.

‘This does not mean, however, that everything will go as planned from here. There are many challenges ahead. We will need to improve long-term and inclusive economic development. Pressure to increase state expenses in many areas will grow. Medium-term budget provides that tax burden will gradually reduce in relation to GDP. It will be hard for the government to balance this. It is likely that necessary, unpopular and potentially painful decision will have to be made,’ – says the economist.

Ref: 102.109.109.6783


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