Solid medium-term growth prospects and sound fiscal fundamentals anchor the ratings. Exposure to external shocks and longer-run demographic pressures are key challenges.

The country's prolonged exposure to the cost-of-living shock amid higher geopolitical risks drives the Outlook revision. Latvia's solid medium-run growth prospects and moderate public debt underpin the rating affirmation.

Solid economic growth prospects and reduced financial sector risk drive the Outlook change. Unfavourable demographics, an exposure to external shocks and banking spill-over risks remain credit challenges.