Moody's: Latvia stronger, more resilient

In its annual report on Latvia, Moody's Investors Service said the government's A2 foreign- and local-currency government bond ratings recognize the success of Latvia's transition over the past decade, its low level of debt and its strengthened financial system, which has increased the country's resilience to external shocks.

The government bond ratings and Moody's assessment of a low risk of a payments moratorium in the event of a government bond default are the basis for the rating agency's Aa1 foreign currency country ceiling for bonds.

"Latvia's strong performance during the past years testifies to its improved policy framework," said Moody's analyst Kenneth Orchard. "The ratings are anchored by the political consensus on the direction of structural reforms within the context of European Union integration."

The country's ratings also take into account worsening imbalances in the economy and Latvia's continued susceptibility to external shocks, the agency said. The sizable widening of the current account deficit in recent years has been covered to a large extent by external borrowing, mostly short-term, Moody's added.

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