Outlook on Latvia was changed from "negative" to "stable," by the rating agency Standard and Poor’s. Finance minister Einars Repse said that this move would bolster the recession-hit Baltic

state's investment appeal. "We believe that prospects for economic recovery in Latvia are improving given the shrinkage in external imbalances and the government's progress in

stabilizing public finances," said a statement issued in London by the rating agency.

According to Eurostat figures, Latvia had the highest rate of unemployment in the European Union, at around 22 per cent in December.

That figure is notable for being more optimistic than official estimates that the Latvian economy will contract by between 2 and 4 per cent in 2010, following an 18 per cent contraction in 2009.

 “Ratings upgrade has validated our efforts of introducing a hard hitting austerity regime,” said Latvian finance minister, Einars Repse

"The decision confirms that the Latvian government's work has been recognized and that we have taken serious and effective measures," he said.

Repse further added," This assessment is very important to our foreign investors, and the entire international community since it is an important signal confirming Latvia's progress in overcoming the economic crisis." (With Input from Agencies)