Moody's cuts Latvia

Moody's Investors Service has today downgraded the foreign- and local-currency ratings of the government of Latvia to Baa1 from A3.

The outlook remains negative.

The downgrade reflects the further intensification of the economic adjustment in Latvia since October 2008, Moody's said.

The economic downturn is now expected to be deeper and more prolonged than previously assumed. Government borrowing will rise significantly over the next few years to smooth the adjustment and prevent a major economic crisis, resulting in a deterioration of the government's credit metrics relative to its peers, the agency added.

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