On Friday, November 7, 2025, Fitch Ratings (Fitch) affirmed Latvia's credit rating at A- with stable outlook.
In accordance with agency`s view Latvia's rating level A- reflects a credible economic policy framework supported by EU and eurozone membership, and lower, albeit rising, government debt and debt servicing costs than rating peers. These strengths are balanced against the economy's small size, which leave it exposed to external shocks, lower GDP per capita, and a higher current account deficit relative to A peers.
Fitch considers geopolitical risks to be mitigated by NATO's mutual defence clause, even as the uncertainty about the US commitment has increased, and the government's plan to substantially raise defence spending over the medium term. The government projects core defence expenditure will be close to 5% of GDP in 2026.
Fitch forecasts that higher defence spending will raise the general government deficit from 1.8% of GDP in 2024 to 2.6% in 2025, below the government's plan (2.9%), and expects deficit to widen to 3.3% in 2026, in line with government forecasts. The government intends to repurpose part of available EU funds toward defence projects and will apply for additional defence financing under the EU SAFE instrument. Fitch mentions that the medium-term budgetary plan foresees expenditure cuts of about 0.5% of GDP annually in 2026-2028. According to the agency`s view, although the deficit widening is within the constraints of the EU and domestic fiscal framework, it raises medium-term fiscal challenges.
Fitch forecasts public debt ratio will rise to 48.6% of GDP in 2025 and stabilize at about 55% from 2027, reflecting greater clarity on the budgetary impact of defence spending. General government interest payments will rise to 3.4% of revenue in 2027, below the A median.
Fitch projects real GDP growth will accelerate from 1.1% in 2025 to 2.1% in 2027 on stronger private consumption and solid investment. Agency expects a gradual improvement in household spending supported by positive real wage growth, solid credit growth and reduction in the savings rate. Also, Fitch believes that investment will continue to benefit from high EU fund inflows and further implementation of defence projects.
Fitch Ratings published previous assessment of Latvia’s credit rating on May 9, 2025, when rating was affirmed at "A-" with stable outlook.
The full publication is available on the Fitch Ratings website.