He said that Latvia's economy shrank by 3.6% last year due to the impact of the pandemic. The services sectors associated with handling people were most affected. At the beginning of 2021, the still high rates of Covid-19 morbidity and restrictive measures put a brake on economic recovery in Latvia and Europe as a whole.
According to Dombrovskis, Latvia's economy will grow by 3.5% this year and consumption will return to its previous level, there will be an increase in investment, including thanks to a significant influx of funding from the European Union (EU). In his view, it is important in this context that Latvia make effective use of the available resources of the European Economic Recovery Facility.
He also pointed out that State aid to entrepreneurs and households has increased significantly this year compared to 2020. Budget deficits are also rising accordingly.
In 2020, the budget deficit reached 4.5% of gross domestic product (GDP), but is projected at 7.3% this year. For the next year, the EC forecasts that Latvia's economy will grow by 6%.
The EC forecasts show that Estonia's GDP will grow by 2.8% this year, and 5% next year. In Lithuania, the EC expects GDP growth of 2.9% this year, and of 3.9% next year.
The EC's spring economic forecasts estimate a rise of 4.2% in the EU economy this year, with an increase of 4.4% next year.
Inflation is currently projected to be 1.9% in the EU in 2021 and 1.5% in 2022. For the euro area, inflation is projected to reach 1.7% in 2021 and 1.3% in 2022, according to the EC Delegation in Latvia.