Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. 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/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews of an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Latvia (A-/Stable; S-1/Stable) on 4 February 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. 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 ratings history can be found on www.scoperatings.com.

Key rating factors

Latvia’s A- rating is underpinned by i) a pre-crisis record of prudent fiscal management supporting moderate public debt levels; ii) institutional strengths and a track record of effective policymaking, underpinned by EU and euro area memberships; and iii) improved resilience against external shocks, with declining levels of short-term external debt. The government adopted a large fiscal package to mitigate the Covid-19 crisis’s economic impact, which, alongside the cyclical decline in tax revenues, has resulted in higher public debt-to-GDP ratio, although debt ratios nevertheless remain lower than those of most sovereign peers. In addition, Latvia benefits from favourable financing conditions. Challenges relate to i) still moderate per-capita income relative to that of euro-area economies, alongside moderate productivity growth; ii) a large exporting sector relative to the small size of the economy, which exposes Latvia to external shocks; and iii) unfavourable demographic trends. Scope expects the government to remain committed to sustaining sound public finances and favourable investment environment following this crisis.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 9 October 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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