Analytics, Baltic States – CIS, Economics, GDP, Latvia, Markets and Companies

Specialists at the Bank of Latvia were still hoping last year that the economic growth forecast will remain at 2.8%. Nonetheless, it has now been reduced to 2%, and it is possible that it could be reduced further.

Rimsevics said that there are several factors which can affect Latvia's economy – revival of Liepajas metalurgs, growth of the tourism industry, government's attempts to facilitate lending in Latvia, and what will happen to temporary residence permits issued to third-country citizens in exchange for investments in Latvia.

All these factors could "warm up" Latvia's economy, Rimsevics said.

The situation is serious, and if nothing is done about it, it could last for a year or two, he added.

He indicated that mortgage lending in Latvia has almost stopped. For instance, there is only one bank in Latvia that offers first home mortgage program to its clients. Rimsevics believes that the government ought to allocate several million euros for the first home mortgage program.

Thanks to the temporary residence permits program, Latvia has acquired one billion euros – 1.5% increase in domestic product, which also means steady jobs and lower emigration. According to Rimsevics, one such temporary residence permit equals three jobs in Latvia.

Russia's economy is slowing down at a very fast rate, and that will have a negative impact also on the national economy of Latvia, as the Bank of Latvia President Ilmars Rimsevics said.

Rimsevics said that it is reasonable to expect that the economic situation in Russia will be worse than what the official figures show.

He also said that Russia's sanctions have left a negative impact on Latvia's economy – some people have lost their jobs, and Russia's agricultural and food products market has been closed to Latvia.

Rimsevics believes that before state officials discuss any sanctions against Russia, they should assess in a practical way what it could mean to residents and producers of Latvia. He added that so far, the sanctions have been well thought out, and no dramatic steps have been taken. "There are constant hopes that the sanctions will serve as a signal to return to a dialogue," Rimsevics said.