Scope has completed a monitoring review for the Republic of Latvia
Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereign, sub-sovereign and supranational issuers. Monitoring reviews are unrelated to the calendar that outlines public finance rating actions.
Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.
Scope completed the monitoring review for Latvia (A-/Stable; S-1/Stable) on 18 August 2020. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.
Key rating factors
Latvia’s A- rating is underpinned by i) still moderate public debt levels relative to sovereign peers, supported by Latvia’s prudent fiscal management; ii) its institutional strengths and effective policymaking supported by EU and euro area membership; and iii) improved resilience against external shocks, with falling levels of short-term external debt. The government adopted a large fiscal package to mitigate adverse economic effects from the Covid-19 shock, which alongside the cyclical fiscal deterioration will cause the general government debt-to-GDP ratio to increase, nevertheless remaining lower than in most of its sovereign peers. In addition, Latvia benefits from favourable financing conditions. However, still moderate per capita income levels relative to those of euro area peers, its small-open economy, which exposes Latvia to shocks, such as the Covid-19, and moderate productivity growth and unfavourable demographics remain challenges.
The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Public Finance and Sovereign Ratings, 21 April 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Levon Kameryan, Analyst
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