The Fitch ratings agency said April 12 it affirmed Latvia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A-' with a Stable Outlook, citing "solid public finances, as well as institutional strengths and a credible policy framework that come with EU and eurozone membership," eng.lsm.lv reports.
"Public finance metrics compare favorably with peers, underpinned by modest fiscal deficits, relatively low debt levels and political consensus around fiscal prudence. Fitch expects the 2019 general government deficit to remain at 0.7% of GDP, slightly above the 0.5% projected in the budget approved in early April, but well below the projected 2.0% peer median deficit. Although the budget foresees modest expenditure cuts, Fitch does not expect these to fully offset lower net corporate income revenue associated with the tax measures adopted in 2017 that narrowed the corporate tax base. The impact of the reform was already evidenced in 2018, with the rate of growth in tax revenue falling below nominal GDP growth, despite very strong macro tailwinds," he agency said in a note.
"There is little clarity at present about the new government's medium-term fiscal agenda, but Fitch believes the authorities will continue to target low deficits," Fitch said, adding that it expects GDP growth to moderate in 2019-2020, to an average of 3.1%, after reaching a seven-year high of 4.8% in 2018.
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