No change on Latvia, says influential rating agency / Article

The news of no change was given a positive spin by Prime Minister Evika Siliņa who said: “Latvia has a stable credit rating, and Moody’s decision to confirm it at A3 with a stable outlook is very good news for our economy. This confirms that, despite increased geopolitical risks and rapid strengthening of defense capabilities, investors and international partners trust Latvia’s ability to implement a strict fiscal policy, manage debt and adapt to shocks.”

According to the agency, the affirmation of Latvia’s credit rating at the current level reflects the solid foundations of economic growth and a relatively high level of per capita income compared to other countries in the world.

The stable outlook for Latvia’s credit rating reflects Moody’s view that Latvia’s geopolitical risks will remain elevated, although they are mitigated by the country’s membership in NATO, the permanent deployment of NATO troops in Latvia, and the strengthening of the country’s defense capabilities.

According to the agency, the current significant increases in defence spending, which will also affect the growth of Latvia’s public debt relative to gross domestic product (GDP), will not significantly worsen Latvia’s creditworthiness in the medium term.

The agency forecasts that the real growth rate of the Latvian economy will average a modest 1.8% in 2025–2034. Moody’s estimates that after a decline in 2023 and stagnation in 2024, the growth rate of Latvia’s GDP will turn out to be 1.7% in 2025, while the agency forecasts it to increase to 2.4% in 2026 and to 2.2% in 2027 – though obviously this is subject to numerous external conditions.

Moody’s notes that general government debt was 46.6% of GDP in 2024, and forecasts that it will increase to 49.6% in 2026, mainly due to increased defence spending.

Moody’s previously affirmed Latvia’s credit rating at the current level of A3 on July 25, 2025, maintaining a stable outlook for the credit rating.

As previously reported by LSM, other ratings agencies have recently given very similar assessments of Latvia’s economy and prospects. 

The decisions of the various international rating agencies remain important benchmarks for investors, despite their notorious failure to notice the dramatic sub-prime loan crisis of 2008 until it was already happening. After taking a serious reputational knock when the subsequent global economic strife unfolded, rating agencies have spent the years since slowly regaining their powerful positions.  

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