European Commission predicts 5.6% GDP contraction for Latvia this year

The latest economic forecasts from the European Commission predict that Latvia's economy will shrink by 5.6% this year. While that is still a major economic hit, it is better than the eurozone average.

Though the EC text talked about a "5½%" decline in GDP, accompanying data tables and comments from EC Commissioner Valdis Dombrovskis quoted a figure of 5.6%.

"Latvia’s GDP is projected to decline by 5½% in 2020 with consumption and exports set to decline the most. It is expected to recover most of the lost ground in 2021 thanks to a rebound in consumption and private investment. Growth should remain solid in 2022 at around 3½%. The government deficit is projected to reach 7½% of GDP in 2020 due to support measures and a drop in tax revenue. It is projected to narrow to 3% by 2022 as government revenues recover," the Commission said.  

The Autumn 2020 Economic Forecast projects that the euro area economy will contract by 7.8% in 2020 before growing 4.2% in 2021 and 3% in 2022. The forecast projects that the EU economy will contract by 7.4% in 2020 before recovering with growth of 4.1% in 2021 and 3% in 2022.

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Compared to the Summer 2020 Economic Forecast, growth projections for both the euro area and the EU are slightly higher for 2020 and lower for 2021. Output in both the euro area and the EU is not expected to recover its pre-pandemic level in 2022.

"The coronavirus pandemic represents a very large shock for the global and EU economies, with very severe economic and social consequences. Economic activity in Europe suffered a severe shock in the first half of the year and rebounded strongly in the third quarter as containment measures were gradually lifted. However, the resurgence of the pandemic in recent weeks is resulting in disruptions as national authorities introduce new public health measures to limit its spread. The epidemiological situation means that growth projections over the forecast horizon are subject to an extremely high degree of uncertainty and risks," said the Commission.

The full EC outlook for Latvia is attached to this news story in PDF format.

 
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