"Exports are boosted by strong foreign demand, investments are finally picking up again, while the households' optimism and increasing income are driving consumption. The economy is growing fast, but credit demand is still weak, it seems because both households and companies are biding their time for large purchases and investments. However the improvement of economic sentiments, stable corporal finances, weak investments in the last years and the booming labor market will drive credit demand up and boost domestic demand in the next few years," says Swedbank chief economist Mārtiņš Kazāks.
"According to our forecasts Latvia's economy will grow a good 4.0 to 4.2% in 2017 and 2018 but as the business cycle slows down [..] it will reach 3.2% in 2019 which is still above the current growth potential," the forecast says.
Affected by external factors, the increased excise tax and wage growth, the average annual inflation will be close to 3% in 2017 and 2018, and will be at 2.2% in 2019, says the forecast.
Also August 29, rival Scandinavian bank SEB predicted in a forecast: "Latvia's high GDP growth will eventually run into bottleneck problems and rising wage pressure; growth will retreat from 4.1 per cent this year to 3.1 per cent in 2019."