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Friday, 29.03.2024, 12:08
FinMin raises Latvia’s economic growth forecast for 2018 to 4%
Compared to the previous forecasts on which the 2018 budget was based, GDP
growth forecast for 2018 has been raised by 0.6%age points, and the forecast
for 2019 by 0.2 percentage points.
The economic growth is expected to accelerate because of the favorable
situation in external markets and increased investment activity in Latvia as
the flow of the EU funds grows, the ministry said. In 2017 Latvia’s GDP rose
4.5%, according to preliminary results, and it was the steepest rise since
2011.
The Finance Ministry expects that in 2018 and in a medium term there will
be strong export growth, while investments are expected to rise 10%. Private
consumption will also be a strong drive, promoted by a strong wage growth and
further reduction of unemployment level. The gross monthly average wage in 2017
increased by 7.5%, and might grow 8% in 2018, reaching EUR 997 a month,
according to the ministry. The steep wage growth this year will be determined
by the growing demand for employees, and significant increase of the minimum
wage as of January 1, 2018. In 2019 the average wage is expected to grow slower
– by 6%.
Consumer price level in Latvia in 2018 will remain at the previous level at
2.8%. The comparatively high inflation level in 2018 will be determined by the
strong economic growth, increase of wages, and excise tax hike on oil products,
tobacco products and alcoholic beverages, while in 2019 inflation is expected
to drop to 2.4%.
The Finance Ministry’s macroeconomic forecasts have been developed based on
a conservative scenario, assessing risks of internal and external environments.
The forecast risks are upward and may ensure a steeper GDP growth than
projected in the base forecast. On the other hand, there are a number of
serious negative risks, including the low investment level in national economy.
Reduction of the number of working age employees creates a pressure in the job
market and stimulates further increase of wages that may influence Latvia’s
international competitiveness. Among external negative risks, there are also geopolitical
instability, political uncertainty and the high fluctuation level in the
world’s financial markets.