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

EY has included for the first time a special report about Latvia as the euro-zone's newest member. The report points out that Latvia will be the fastest growing euro-zone economy until 2018, and will see GDP increase 4.1% in 2014, 5.2% in 2015 and five% in 2016, according to economic researchers from EY and ''Oxford Economics''.

''The pace of economic expansion in Latvia moderated last year and we expect growth to remain broadly unchanged at just over 4% in 2014. Thereafter, the pace is expected to pick up to around five% a year in 2015–18, supported by a rebound in domestic demand. This means that Latvia will be the fastest-growing Eurozone economy throughout the forecast period,'' the report points out.

The EY report also say that employment figures will continues to improve in the coming years. ''Unemployment fell sharply last year, despite the slowdown in economic growth. Further improvements in the labor market are expected over the forecast horizon, driving faster real income gains in 2014–15. This will in turn support robust growth in consumer spending,'' the report points out.

EY points out that with base interest rates now down to European Central Bank (ECB) levels, borrowing rates in Latvia will be lower than those that would have prevailed outside the euro-zone. ''Membership of the single currency will also boost inward investment, by removing transaction costs and residual currency risk. These developments, and rising domestic demand, will drive strong private sector investment in 2014–15, offsetting the effect of public spending cuts,'' the report says.

''Exports were dampened by Eurozone problems last year, but renewed growth among Latvia’s trading partners in Europe

is forecast to drive a strong rebound in export growth in 2015–18. This will ensure that the current account deficit stays at a modest level (financeable by long-term capital inflows) despite a pickup in import growth,'' the report goes on to say.