OREANDA-NEWS. On December 19, 2007 Moody's Investors Service (Moody's), the international credit rating agency, reaffirmed its rating for the local and foreign currency government bond rating of A2 for Latvia, the credit agency said in its annual report on Latvia.
 
Moody's said its A2 government bond rating and stable outlook on Latvia recognize the country’s successful transition over the past decade. The agency said the bond rating and its assessment of a very low risk of a payments moratorium serve as the basis for Latvia’s foreign currency ceiling for bonds of ‘Aa1’.  
 
In September Moody's downgraded Latvia’s long-term foreign and local currency debt ratings from ‘positive’ to ‘stable’, citing the country’s macroeconomic risk factors, such as macroeconomic imbalances, huge current account deficit, high rate of inflation and susceptibility to external shocks. According to Moody's, persistently high inflation makes it unlikely that Latvia will win accession to the European Monetary Union (EMU) in the next few years. 
 
„It appears that Latvia is now in a classis wage-price spiral, whereby higher inflation expectations generate higher wage demands than that feed through to higher prices. Such a cycle can be difficult to break, especially in an environment of rapid economic growth,” the credit agency said in its most recent Credit Analysis.