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

International Internet Magazine. Baltic States news & analytics Monday, 10.08.2020, 18:43

Dombrovskis: Latvia is using opportunities provided by EU rather well

BC, Riga, 08.07.2020.Print version
Latvia is using the opportunities provided by the European Union (EU) for economic rather well, Valdis Dombrovskis (New Unity), Executive Vice President of the European Commission (EC), said in an interview with Latvian Radio on Wednesday.

"Latvia is utilizing these instruments rather well," said Dombrovskis.

At the same time, speaking about the rapid rise in the unemployment rate, Dombrovskis noted that in general, the rise in the unemployment rate in Central and Eastern European countries is faster than in many Western European countries, where the recession is even deeper.

"One of the factors influencing this is the overall structure of the labor market - in Central and Eastern European countries, the labor market is more flexible, which allows companies to lay off workers faster in a crisis, but on the other hand, entrepreneurs are not afraid to attract workers during economic growth," said Dombrovskis.

He also noted that measures such as downtime benefits and various short-term employment schemes could reverse this trend, but with the recession as deep as it is today, the rise in unemployment cannot be completely reversed.

Dombrovskis also pointed out that although the recession in the EU as a whole has turned out to be deeper than previously projected by the EC, the rise in unemployment has not been as rapid as initially estimated. "These short-term employment measures have had a positive effect," he said.

As reported, the European Commission's Summer 2020 Economic Forecast for the Latvian economy remains unchanged from the spring forecast, anticipating a 7 percent contraction of Latvia's GDP this year and a 6.4 percent increase in 2021.The recession the European Union (EU) and the euro area are going to see this year due to the coronavirus pandemic, will be deeper than previously thought, according to the Summer 2020 Economic Forecast released today by the European Commission. 

This year, the EU's GDP is forecast to contract by 8.3 percent and the euro area's economy to shrink by 8.7 percent, according to the latest prognosis. In its spring forecast, the European Commission projected the EU economy to reduce by 7.4 percent and the euro area economy by 7.7 percent. 

"The EU economy will experience a deep recession this year due to the coronavirus pandemic, despite the swift and comprehensive policy response at both EU and national levels. Because the lifting of lockdown measures is proceeding at a more gradual pace than assumed in our Spring Forecast, the impact on economic activity in 2020 will be more significant than anticipated," the European Commission said. 

"However, early data for May and June suggest that the worst may have passed. The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across Member States," the Commission added. 

Next year, the EU economy is projected to grow by 5.8 percent and the euro area economy to expand by 6.1 percent. 

According to the summer forecast, EU inflation is projected at 0.6 for this year and 1.3 percent next year. In the euro area, inflation is forecast at 0.3 percent for this year and 1.1 percent next year. 

"The European Commission expects a recovery of the European economy in the second half of this year, but the overall dynamic of the economy will depend on how successfully the Covid-19 pandemic is overcome and how fast member states can lift their restrictions," the European Commission's Executive Vice President Dombrovskis told LETA.

Commenting on economic forecasts for 2021, the EU commissioner said that it is essential to reach an EU-wide agreement on Europe's recovery plan as soon as possible, to give a strong stimulus to the recovery. 

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