Analytics, Economics, Financial Services, GDP, Latvia

The expert said that a “rather pleasant feeling” currently prevails in the Latvian economy, which is growing, with some sectors like exporting industries, manufacturing and retail trade even showing unexpectedly strong performance and investment recovering as well.

“The Fiscal Discipline Council has approved the Finance Ministry’s macroeconomic forecast, projecting this year’s GDP growth at 3.7%, but current trends suggest that the actual growth will be well above the projected rate,” Kazaks said.

The economist noted, however, that Latvia’s economic growth is still slower than prior to the economic crisis, which means that there are no worries about possible overheating or an economic bubble. “Don’t even dream of it,” Kazaks said.

Given the strong economic growth results, Kazaks recommends the government adopting a more prudent fiscal policy and creating a reserve for leaner times.

“So far, the government’s fiscal policy has been conservative, but we would not want the government to become complacent, so we advise creating a reserve,” Kazaks said, adding that the decision not to create a fiscal reserve in 2019 is a mistake.

Kazaks also warned that without structural reforms, Latvia may not be able to meet its economic growth target of 3% a year after 2020.