Economics, Financial Services, GDP, Latvia
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Thursday, 28.03.2024, 23:13
Latvia: Finance Ministry cuts economic growth forecast for 2019 to 2.2%
Last year, the Finance Ministry anticipated Latvia's GDP
growth in 2020 to be close to 3%.
The Finance Ministry has started working on Latvia's
Stability Program for 2020-2023, and released macroeconomic development
forecasts for the period up until 2023.
According to the latest forecasts, Latvia's economy will
grow by 2.2% in 2020, economic growth will accelerate to 2.8% in 2021 and 2022,
while in 2023 Latvia's GDP will increase 2.4%.
Compared to the previous forecasts released in June 2019,
the GDP growth forecast for 2020 has been reduced by 0.6 percentage points,
while the forecasts for 2021 and 2022 remain unchanged.
"Latvia's economic growth slowed down to 2.1% last
year, and the forecast for 2020 has also been affected by a less favorable
situation on foreign markets and less favorable developments in several key
sectors of Latvian economy, including transport and construction, as well as a
significant increase in external risks," explained the ministry.
Thanks to strong personal income growth and low
unemployment, private consumption will be the main driver of economic growth in
2020, rising by 3.3%.
The Finance Ministry also predicts that investment growth
will be slower than in past several years and export growth rate will remain
modest at 2.5%, driven by constrained demand on foreign markets and a decline
in transit services. In the coming years, as the situation on foreign markets
improves, Latvia's economic growth will stabilize at 2.8%.
Average annual inflation in 2020 is projected at 2.3%, down
from 2.8% last year. In the coming years, inflation will continue to decrease
and fall to 2% by 2023, said the ministry. Wage growth in 2020 will be slightly
lower than in previous years, but still remain comparatively strong as the
average monthly gross wage will increase 6% to EUR 1,147.
"In the next few years, wage growth will gradually slow
down, stabilizing at 5% by 2023, close to productivity growth," the
Finance Ministry said.
The employment rate will remain stable in the medium term,
with a slight downward trend, as a result of more moderate economic growth and
a decline in the working-age population. In turn, the unemployment rate in 2020
will stabilize at 6.4%, but will continue to decline gradually, falling below
the 6% mark by 2023.
In developing its macroeconomic projections, the Finance
Ministry relied on conservative assumptions and assessed external and internal
risks, which, if materialized, could result in faster or slower economic growth
than currently projected.
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