Stock Market Impact: The affirmation of an A/A-1 sovereign rating with a stable outlook supports confidence in Latvian sovereign bonds, yet projected debt rise to 45% of GDP and widening deficits may pressure yields.
Listed Companies and Sectors: No specific corporate announcements; however, defense spending exceeding 5% of GDP and EU‑funded public‑sector investment are likely to benefit the defence and infrastructure sectors.
Investment Flows: Latvia has been allocated €3.5 billion in loans from the EU’s €150 billion Security Action for Europe programme; S&P expects current‑account deficits to be largely financed by EU fund inflows and foreign direct investment.
Interest Rates, Inflation, and Liquidity: Inflation is projected to stay above 4.0 % in 2026, driven by higher energy prices from the Middle‑East conflict; no direct monetary policy actions are mentioned.
Fiscal or Monetary Policy: General‑government deficit is forecast to widen to over 4 % of GDP by 2028, driven by defence spending >5 % of GDP. The EU Council approved activation of the national escape clause under the Stability and Growth Pact to accommodate the higher defence outlays. GDP growth is expected at 2.0 % in 2026, accelerating to an average of 2.4 % in 2027‑2029, supported by resilient consumption, public‑sector investment and EU fund inflows.
