Latvia’s gross domestic product (GDP) will decline 7.3% this year. Next year the country’s economy will grow 4.7%, according to international ratings agency Moody’s Investors Service, Inc. (Moody’s).
According to Moody’s estimates, Latvia’s credit rating, which is at A3 level, is supported by three main factors – flexible and relatively varied economy, the government debt’s moderate level and efficient policy-making.
The agency predicts the coronavirus pandemic in Latvia will cause a rapid GDP decline – 7.3%. This will cause a considerable negative effect on the country’s financial state.
It is expected that the budget deficit this year will reach 9.8% of GDP, whereas the state debt burden will increase 12.4 percentage points. Nevertheless, it will remain moderate and appropriate to A level credit rating.
Moody’s estimates show that Latvian economy’s gradual recovery will be felt starting with the second half of 2020. Next year it will return to growth of 4.7%.
Although money laundering and corruption scandals in 2018 also created concerns about the quality and integrity of financial supervision, Latvia’s government has since made major progress in this field, as reported by the agency.
Moody’s explains that a negative entry in Latvia’s rating profile would mean a hit for the country’s fiscal state, worsening of the country’s economic indexes or lowered efforts to battle money laundering risks. Other negatives include escalation of tension with Russia, which could affect Latvia’s economic growth and fiscal capabilities.