International Internet Magazine. Baltic States news & analytics
Tuesday, 22.07.2014, 12:18
Latvian Finance Ministry reduces GDP growth forecast for 2012 to 2%
The Finance Ministry predicts Latvia's gross domestic product (GDP) will increase by 2% this year, down from the previous forecast of 2.5%, writes LETA.
As reported, this past January, the Bank of Latvia reduced its GDP forecast for this year to 1.3%.
At the end of 2011, the Bank of Latvia predicted that the country's economy will grow by 2.5% this year.
On the other hand, commenting the reduction in this year's GDP forecast by the central bank, Prime Minister Valdis Dombrovskis said that the Bank of Latvia has made a mistake, and that this year's GDP growth will be much higher than 1.3%.
Furthermore, the European Commission predicts that Latvia's gross domestic product will increase 2.1% this year, which will be the third highest increase across the European Union.
Latvia's economic growth will slow down, believe economists surveyed by Nozare.lv.
Swedbank senior economist Dainis Stikuts told Nozare.lv that Latvia's economic development is mostly based on export, as indicated by the fact that manufacturing industry, trade, transport and storage sectors contributed the most to Latvia's gross domestic product (GDP) growth in the fourth quarter of 2011.
Stikuts believes that the construction sector and investment projects related to the absorption of EU funds also considerably contributed to GDP growth.
Latvia's economic growth gradually slows down. Even though the risk of a more negative scenario slowly decreases, the eurozone's issues have not been completely solved yet. Therefore the driving force behind Latvia's economic development – export – could be negatively affected. It is expected that the GDP will grow 2% this year, said Stikuts.
SEB banka economist Dainis Gaspuitis pointed out that Latvia's economic growth is remarkably good when compared to other EU member states. Further forecasts, however, indicate about more moderate growth.
"Even though Latvia's economy is better prepared for potential external shocks, it will not be possible to dodge the impact of the eurozone's recession. The growth brought by the Baltic export boom slowly reduces. This is currently felt the most in Lithuania and Estonia, since export constitutes larger share of their economies. Latvia's recovery is slightly delayed, therefore it is expected that the country's economic growth will slow down moderately, said Gaspuitis and added that the GDP could grow 2.5% this year.
Nordea banka chief economist Andris Strazds explained that the latest data on Latvia's potential economic development this year indicates that Nordea will have to review its 1% GDP growth forecast for this year.