Summary: Latvia (Republic of) Jun 06

Standard & Poors, June 2006

Abstract
The ratings on the Republic of Latvia are supported by favorable fiscal indicators and the authorities' commitment to deepening market-based reforms. Recent rapid inflation and credit growth, however, have increased the risk of the economy overheating, and warrant close monitoring of developments in the banking sector. Latvia's general government debt was a very low 12% of GDP in 2005. Moderate general government deficits of 0.5%-1.5% of GDP will keep the debt ratio stable in the medium term. Nevertheless, these moderate deficits must be seen in the context of very fast revenue growth stemming from dynamic domestic demand. A tighter fiscal stance would be required to reduce the risk of overheating and dampen the demand pull on price growth. Weak external...

Companies mentioned in this report are:
- Latvia (Republic of)

Action: Review

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This product consists of a Summary Analysis: Bi-annual (at least). An abbreviated analysis containing Standard & Poor's issuer credit ratings as of the time the article was published. The analysis includes a rating rationale - the basis on which the rating was assigned - and an outlook section if the issuer is not on CreditWatch. Financial statistics are not included.

- Latvia (Republic of)

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