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Country Risk Service Latvia 4th Quarter

  • ID: 2316027
  • Country Profile
  • Region: Latvia
  • 22 Pages
  • The Economist Intelligence Unit
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Latvia's sovereign risk score is at the safe end of the BBB band and has improved since The Economist Intelligence Unit's last ratings report, in August, from 31 to 29. This was driven by a decline in political risk following the October 6th general election, and improvements in economic policy and in the current-account balance. There is a strong political consensus on fiscal prudence, and public debt levels are low (at 40% of GDP in 2017).

The score has improved by 1 point, to 26, and the rating remains at A. The brighter economic and institutional outlook for the euro zone has increased the bloc's resilience to political risk and external shocks, and structural support for the currency comes from a large regional current-account surplus. We expect the euro to average US$1.20:EUR1 in 2019-20, after an estimated US$1.18:EUR1 in 2018.

The banking sector risk rating remains at BBB and the score remains unchanged at the safer end of the band. The ratio of non-performing loans has fallen rapidly since the 2008-10 crisis, and the mainly Scandinavian-owned banking sector now has high capital-adequacy ratios and liquidity levels. Financial supervision falls under the European Central Bank (ECB) and is robust.
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Country Risk Service Latvia 4th Quarter

Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk

Definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk

Sovereign risk
Current assessment
Positive factors
Negative factors
Rating outlook

Currency risk
Current assessment
Positive factors
Negative factors
Rating outlook
Foreign-exchange regime

Banking sector risk
Current assessment
Positive factors
Negative factors
Rating outlook

Generic risks
Political risk assessment
Economic structure risk assessment

Country risk
Overall country risk

Central scenario for 2019-23: Political stability

Central scenario for 2019-23: Election watch

Central scenario for 2019-23: International relations

Central scenario for 2019-23: Policy trends

Central scenario for 2019-23: Fiscal policy

Central scenario for 2019-23: Monetary policy

Central scenario for 2019-23: Economic growth

Central scenario for 2019-23: Inflation

Central scenario for 2019-23: Exchange rates

Central scenario for 2019-23: External sector

Key risk indicators

Ratings summary

Quarterly indicators

International assumptions summary

Economic structure

Public finances

Exchange rates, interest rates and prices

Financial sector

Current account

Foreign payment and liquidity indicators

External trade
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