S&P cuts Latvia view to negative

Standard & Poor's said it revised its outlook on the Republic of Latvia to negative from stable on the increasing likelihood of a hard landing for the country's economy. S&P also affirmed its long-term A- and its short-term A-2 sovereign credit ratings.

The ratings are supported by favorable fiscal indicators and strong long-term growth potential as a result of deepening market-based reforms in recent years, the agency said.

The Latvian economy, however, is showing clear signs of overheating. Without the introduction of prompt policy measures to curb surging domestic demand, S&P said there is an escalated risk of a hard landing, which would have adverse effects on the long-term growth potential of the Latvian economy.

The economy grew at a staggering 12% in 2006 in real terms, after exceeding 10% growth in 2005, the agency said. The growth is not due to balanced and sustainable development. The domestic oriented real estate-related sector has dominated the economy in the past two years, S&P said. Domestic demand is acting as the main driving force for growth, while the contribution of net exports to growth has decreased, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.