Good news for Latvia! S&P Global Ratings has reaffirmed Latvia’s credit rating at ‘A’, maintaining a stable outlook. This is a significant vote of confidence in the country’s financial health. But what does this really mean? Let’s dive in!
According to an update released on Friday, November 29th, S&P’s decision reflects the Latvian government’s commitment to a rigorous fiscal policy. This means they’re doing a good job of keeping the state budget deficit and debt under control, even with increased spending. And this is crucial for economic stability.
The Finance Ministry highlighted that this stability is maintained despite a planned increase in national defense spending between 2026 and 2027. The rating agency projects that Latvia’s general deficit, which includes the rise in defense spending to 5% of the Gross Domestic Product (GDP) by 2026, will average 3.8% of GDP annually from 2026 to 2028. This is an important detail to understand.
S&P anticipates the economy to grow by 1.5% in real terms this year and by 2.5% annually between 2026 and 2028. This growth is primarily attributed to better utilization of European Union funds in 2026 and public investments in infrastructure, security, and defense. This is a positive outlook, but there are some potential bumps in the road.
While the Latvian economy has shown resilience to the initial impact of the Russia-Ukraine conflict, S&P cautions that the ongoing war poses challenges to the country’s medium-term growth. And this is the part most people miss… Latvia’s location on NATO’s eastern flank means that security risks are unlikely to diminish, even after the war ends. This is a controversial point…
It’s worth noting that Latvia’s credit rating has remained at the ‘A’ level since S&P’s previous review in May 2025. What do you think about Latvia’s economic outlook? Do you agree with S&P’s assessment, or do you have a different perspective? Share your thoughts in the comments below!