* S&P upgrades Latvia ahead of euro entry
* Small Baltic state got EU go-ahead last week to switch to
euro next year
* Country still emerging from deep 2008-2010 crisis,
NEW YORK, June 10 Standard & Poor's raised its
sovereign credit rating on Latvia on Monday to BBB-plus from BBB
following the country's go ahead to join the euro zone.
The European Commission said last week that Latvia had met
all the economic targets to switch to the euro. The approval
came after several years of crisis fighting and austerity.
"We anticipate that becoming a member of the monetary union
would reduce Latvia's foreign exchange risks and improve its
monetary flexibility," S&P said in a statement.
The outlook on the credit is stable, S&P said.
In Riga, the Finance Ministry said the S&P decision was in
line with its expectation that a green light for a switch to the
euro from the lat currency would lead to ratings' upgrades.
"It can be expected that other ratings agencies will in the
next six months also raise our country's credit rating," Finance
Minister Andris Vilks said in a statement.
Moody's Investors Service rates Latvia one notch lower at
Baa2 with a positive outlook. Fitch Ratings is also one notch
lower at BBB with a positive outlook.
Latvia slashed public spending and raised taxes after the
2008 global credit crunch popped a real estate bubble and one of
its top banks collapsed. Overall, it took austerity measures
equal to more than 15 percent of output, while gross domestic
product declined by about a fifth over 2008-2010.
But growth in exports and improving domestic demand has now
made Latvia become the fastest-growing country in the EU.
S&P said its upgrade reflected its view that euro zone
membership would have a positive impact on Latvian
creditworthiness by reducing foreign exchange risks and
providing the banking system with access to the European Central
Bank as a lender of last resort and provider of liquidity.
It said the stable outlook on the rating reflected an
expectation that the economy would continue its post-crisis
recovery, and that the government would remain broadly committed
to stable fiscal policy.