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Swedbank lowers forecast of inflation in Latvia in 2018 to 3.3%

BC, Riga, 27.03.2018.Print version
Swedbank has lowered its forecast of average annual inflation in Latvia in 2018 from 3.7% to 3.3%, writes LETA, according to the latest Swedbank Economic Outlook.

The forecast of average annual inflation in Latvia next year remains unchanged at 2.5%.


Swedbank has also lowered its forecast of the Latvian economic growth in 2018 from 4.2% to 3% but still expects the Latvian economy to grow 3.2% in 2019.


The forecast of average annual inflation in Lithuania has also been adjusted downwards from 3.3% to 3% but the forecast for 2019 stays at 2.5%.


In case of Estonia, earlier estimates of a 3% inflation in 2018 and a 2.5% inflation in 2019 still stand.


Economic growth in Lithuania is expected at 3.2% this year and at 2.5% next year, and the Estonian GDP growth will be 3.9% in 2018 and 3% in 2019 in line with earlier forecasts.


Martins Kazaks, Chief Economist of Swedbank Latvia, said that this year the global economy was showing the steepest growth since 2011 but protectionism risks have increased and may have negative effects on international trade and global economic growth.


"Last year the Latvian economic growth was the steepest in the last six years as the GDP increased 4.5%. Export performance was excellent, investment activity revived and household consumption also picked up the pace," he said.


Robust economic growth will continue in Latvia also in the next couple of years but at a somewhat slower rate. Kazaks said. He explained that Swedbank had lowered its forecast for economic growth in 2018 due to two reasons - weaker growth at the end of 2017 and a steeper decline in financial services to non-residents this year. But those factors will lose influence in 2019 and economic growth will be a little faster then.


Negative demographic trends and demand for the workforce caused by the economic growth will continue heating up the labor market and pushing up the average wage. The wage growth, coupled with the excise tax hikes, will cause inflation to rise to 3.3% this year but the consumer price growth will slow down to 2.5% in 2019. Inflation notwithstanding, purchasing power will increase and stimulate household consumption, Kazaks said.


As reported, the Latvian GDP in 2017 grew 4.5% compared to 2016 at current prices, according to the seasonally unadjusted data.






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