The international rating agency Moody’s confirmed Latvia's credit rating at the current level of A3 with a stable outlook on Friday, January 16, the Ministry of Finance reported, according to LETA.
Moody’s explains its decision by the strong institutional framework of the country and the effectiveness of the government, which have ensured the consistent implementation of a strict fiscal policy and demonstrated the ability to overcome challenges posed by external factors, including the adaptation of the economy to new conditions during the double blow of the pandemic and the energy crisis.
According to the agency, the confirmation of Latvia's credit rating at the current level also reflects the resilient foundations of economic growth and a high level of income per capita compared to other countries in the world.
Moody’s believes that geopolitical risks for Latvia will remain elevated; however, they are mitigated by the country's NATO membership, the permanent presence of allied armed forces in Latvia, and the strengthening of national defense capabilities.
According to the agency's assessment, a significant increase in defense spending, which will lead to a rise in Latvia's government debt relative to gross domestic product (GDP), will not significantly worsen the country's creditworthiness in the medium term, considering the projected stable economic growth and the continuation of strict fiscal policies.
The agency forecasts that the average real economic growth rate for Latvia from 2025 to 2034 will be 1.8%. Moody’s expects that after a decline in 2023 and stagnation in 2024, Latvia's GDP growth will accelerate to 1.7% in 2025, 2.4% in 2026, and 2.2% in 2027, driven by domestic demand. Although Latvia's small and open economy is sensitive to external shocks, it possesses high flexibility and adaptability, the agency notes.
Moody’s emphasizes that Latvia's credit rating of A3 also confirms the country's experience in implementing strict fiscal policies and the stable state of public finances. In 2024, the general government debt was 46.6% of GDP, and by 2026, Moody’s forecasts it will rise to 49.6% — mainly due to increased defense spending.
The agency highlights that the Latvian government prioritizes increasing spending to strengthen the country's defense capabilities — rising from 3.3% of GDP in 2024 to approximately 5% of GDP in 2026. Moody’s forecasts that the general government debt will peak at around 55% of GDP in the coming years but will begin to gradually decline after 2030.
The previous confirmation of Latvia's credit rating at A3 by Moody’s was made on July 25, 2025, also maintaining a stable outlook.
