S&P: Latvia may face aging pressure

Standard & Poor's said in a report that without concerted policy and fiscal reforms, the aging Latvian population will lead to intense pressure on the public finances and the ratings on the sovereign.

"Absent further reforms, total age-related public expenditure in Latvia (A-/stable/A-2) will rise to 16.5% of GDP in 2050, up from 12.3% in 2005," said S&P credit analyst Moritz Kraemer.

"Without any measures on the fiscal or structural policy front, general government deficits and net debt would rise sharply from the 2030s to reach 9% and 99% of GDP, respectively, by 2050."

A fiscal deterioration of that magnitude would not be compatible with the current A- long-term sovereign rating on Latvia, the agency said.

Based on general government performance, the rating on Latvia would first rise into the AA category by 2010, before coming under increasing pressure, S&P said, adding that by 2015 it would fall back into the A category and would then drop further into the BBB category by 2025.

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