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Country Risk Service Latvia 3rd Quarter

  • ID: 2924051
  • Country Profile
  • Region: Latvia
  • 22 Pages
  • The Economist Intelligence Unit
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Latvia's sovereign risk score remains at the safer end of the BBB band, and the score remains unchanged at 31. Although the next general election will be held in the next three months, any new government does not pose any risks to the sovereign's willingness to pay. There is a strong political consensus on fiscal prudence, and public debt levels are low (at about 40% of GDP in 2017).

The score improves to 27 and the rating remains at A. A better economic and institutional outlook for the euro zone has increased the area's resilience to political risk and external shocks, whereas structural support for the currency comes from a large current-account surplus. The Economist Intelligence Unit expects the euro to average US$1.20:EUR1 in 2018-19, after US$1.13:EUR1 in 2017.

The banking risk rating remains at BBB. The score improves slightly, by 1 point to 36, and sits at the safer end of the band. The improvement is driven by strong real GDP growth, climbing export receipts and improvements in the primary fiscal balance. The ratio of non-performing loans has fallen rapidly since the 2008-10 crisis, and the mainly Scandinavian-owned banking sector now has robust 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 3rd 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 2018-22: Political stability

Central scenario for 2018-22: Election watch

Central scenario for 2018-22: International relations

Central scenario for 2018-22: Policy trends

Central scenario for 2018-22: Fiscal policy

Central scenario for 2018-22: Monetary policy

Central scenario for 2018-22: Economic growth

Central scenario for 2018-22: Inflation

Central scenario for 2018-22: Exchange rates

Central scenario for 2018-22: 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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