Moody's Affirms Latvia's Credit Rating at A3 with Stable Outlook

Rating Confirmed Amidst Economic Resilience

International credit rating agency Moody's Ratings (Moody's) has affirmed Latvia's credit rating at A3 with a stable outlook. The announcement was made on Friday, January 16, 2026, following a periodic review of the country's ratings. This decision underscores Moody's confidence in Latvia's economic fundamentals and its capacity to manage fiscal challenges.

Prime Minister Evika Siliņa welcomed the affirmation, stating, 'Latvia has a stable credit rating, and Moody's decision to confirm it at A3 with a stable outlook is very good news for our economy. This confirms that, despite increased geopolitical risks and rapid strengthening of defense capabilities, investors and international partners trust Latvia's ability to implement a strict fiscal policy, manage debt and adapt to shocks.'

Key Factors Influencing the Affirmation

Moody's based its affirmation on several key strengths of the Latvian economy and governance. These include:

• Strong public finances and solid institutions: Latvia's robust institutional framework and a track record of prudent fiscal policymaking were highlighted.
• Solid foundations for economic growth: The agency noted Latvia's solid trend growth and a relatively high level of per capita income.
• Effective management of shocks: Latvia has demonstrated an ability to address major policy challenges, including significant macroeconomic adjustments during the pandemic and energy crisis shocks.
• Flexible economy: Despite being a small, open economy, Latvia's proven flexibility and adaptability mitigate its vulnerability to external shocks.
• Moderate debt burden and strong debt affordability: These factors contribute to the country's fiscal strength.

Outlook and Geopolitical Considerations

The stable outlook reflects Moody's expectation that while geopolitical risks remain elevated, they are mitigated by Latvia's NATO membership, the permanent stationing of NATO troops in the country, and strengthening defense capabilities. Moody's also anticipates that significant increases in defense spending, a key policy priority for the Latvian government, will not materially weaken Latvia's credit profile over the medium term.

The agency forecasts that Latvia's general government debt, which stood at 46.6% of GDP in 2024, will rise to 49.6% in 2026, primarily due to higher defense spending. Defense spending is planned to increase to approximately 5% of GDP from 2026 onward, up from 3.3% in 2024. Despite this, debt is expected to peak around 55% in the late 2020s before gradually declining throughout the 2030s.

Economic Projections

Moody's projects an average real GDP growth rate of 1.8% for Latvia over the period of 2025–2034. After a contraction in 2023 and stagnation in 2024, the agency estimates real GDP growth to recover to 1.7% in 2025, with further increases to 2.4% in 2026 and 2.2% in 2027, driven by domestic demand.

Moody's had previously affirmed Latvia's credit rating at the A3 level with a stable outlook on July 25, 2025.