Long-time central bank governor Ilmars Rimsevics said various factors were to blame for the cut and claimed the bank had forecast such a scenario.
"In our professional judgement, taking into account the latest data, Latvia's economic growth this year will be a 2.0%," Rimsevics told journalists at a press conference.
Pēc mūsu speciālistu vērtējuma, ņemot vērā jaunākos datus, Latvijas tautsaimniecības izaugsmes temps šogad būs 2.0% pic.twitter.com/5RvKTHKjCR
— Latvijas Banka (@LatvijasBanka) June 10, 2016
He also said the central bank's inflation forecast had been revised down from 0% to inflation of -0.4% (in other words, deflation) with a return to inflation of 1.3% expected in 2017.
He called for "immediate" reforms in the health service and particularly the introduction of compulsory health insurance. However, with health minister Guntis Belevics resigning just a few hours earlier, that looks a folorn hope.
The central bank also displayed a now-familiar graphic comparing the need for "structural reforms" to a stool with a broken leg.
Rimšēvičs: Latvijas tautsaimniecība saskaras ar strukturālām problēmām un to risināšanai nepieciešamas reformas pic.twitter.com/Gdee5Gdu1B
— Latvijas Banka (@LatvijasBanka) June 10, 2016
"It is premature to talk about an economic crisis, rather the Latvian economy is 'cooling'," Rimsevics said.