S&P affirms Latvia

Standard & Poor's said it affirmed the BBB+ long-term and A-2 short-term sovereign ratings on the Republic of Latvia.

The outlook remains negative due to the continued risk of a hard landing for the Latvian economy, specifically a sharp economic slowdown that is substantial enough to reduce employment, increase private sector insolvencies and significantly worsen the public sector balance sheet, according to the agency.

S&P said the affirmation reflects expectation that the Latvian economy will continue its readjustment process in the course of 2008 and 2009, as domestic demand moderates and the current account deficit narrows.

The agency said it expects continued financial account inflows and European Union fund inflows in the capital account to finance the still sizable current account deficit and elevate pressure on the currency during the readjustment process.

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