Ratings agency Fitch Ratings increased Latvia’s credit outlook, saying that indicators showed that public debt would decline relative to the gross domestic product. This is the former Soviet Republic state’s third credit assessment in three weeks
Fitch upgraded the credit score one notch higher to A-, up from BBB+, which is the same as for Poland and Malaysia. This level is the fourth-lowest investment grade rating, and it was where Latvia was in the first six months of 2007 before the financial downturn when the GDP fell by over a fifth. This forced the government to apply for a bailout.
“Positive debt dynamics support Latvia’s rating,” Fitch analysts Kit Ling Yeung and Paul Rawkins e-mailed Bloomberg. “Latvia’s growth prospects are positive notwithstanding heightened geopolitical risk, which has had little spill-over effects to date.”
Moody’s Investors Service increased Latvia’s rating by one level on June 13, while Standard & Poor’s did so on May 30, with the two agencies pointing to the lower debt ratio, economic growth and the adoption of the euro as the main reasons for their upgrades.
Fitch estimates that Latvia’s economy will grow by 3.6 percent in 2014 and 3.8 percent next year, boosted by investment expenditure and domestic demand. The economy grew by 2.8 percent in the first three months of the year from a year ago. Fitch also predicts that the budget shortfall will average 0.9 percent of the GDP in 2014 to 2016.
Fitch analysts also forecast the country’s public debt-to-GDP ratio to decline to 33.5 percent next year, down from 2013 level of 38.1 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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