Analytics, Economics, EU – Baltic States, Financial Services, GDP, Latvia

Aseradens had invited to the seminar experts from the government institutions, commercial banks and business associations to discuss publicly raised concerns about signs of economic overheating.

"The current situation is different from that in 2007 therefore we see no risk of economic overheating. But we see that the economy may slow down, if productivity did not keep up with the pace of wage growth," the minister said.

Janis Salmins, a representative of the Economics Ministry, said that the Latvian economy was now growing at a faster pace than in previous four years but no threats of economic overheating were in sight as witnessed by a number of macroeconomic indicators, for example, the national budget is balanced, the government debt is one of the lowest in the EU etc.

A representative of the Finance Ministry also agreed with this, saying that there were no signs of overheating but, in the ministry's opinion, the problems with productivity need to be addressed which could be done with help of new investments.

SEB Banka's economist Dainis Gaspuitis and Andris Vanags, a board member of the Latvian Chamber of Commerce and Industry, both agreed there were no signs of overheating but said that some problems were likely to occur when the amount of available EU funding decreased. Vanags suggested that Latvia should be getting ready for the time when the EU funding will become scarce.

The Bank of Latvia economist Uldis Rutkaste said that the term "economic overheating" was being mistakenly compared to the so-called fat years or the economic boom preceding the previous economic and financial crisis. However, if Latvia did not address the problems of employment and productivity, it will sooner or later face "the economic slowdown Portugal-style", namely, problems with competitiveness, he said.

As reported, Martins Kazaks, an economist and member of the Fiscal Discipline Council, said earlier that this year the Latvian economy might grow faster that the projected 3.7%. But 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, he said.