IMF raises Latvian GDP growth forecast

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The International Monetary Fund (IMF) on November 13 increased its forecasts for economic growth in Latvia both this year and next.

In its latest overview of European economies, the IMF said this year it expected Latvia's economy to grow by 3.8% compared with a 3.0% forecast in April.

Similarly next year the IMF predicts 3.9% growth (previous forecast 3.3%) whereas 2019 growth is projected to be 3.5% against a previous estimate of 3.6%.

Encouragingly, growth is also expected in gross investment over the same three year period.

Inflation will be higher than previously predicted, the IMF said, standing at 3.0% both this year and next year before falling to 2.5% in 2019. Unemployment will continue to hover between 8% and 9%.

In other sections of the lengthy report, one of the key findings is that reforms in the judicial system can provide a boost to the economy.

"Greater openness may promote a better judiciary to the extent that investors reward rules-based business environments and businesses adapt to global standards. Import competition in domestic markets may reduce the monopolization of power," the IMF says, using Estonia as a case study.

"Effective institutions, which encompass an effective rule of law, play a key role in promoting more equitable and sustainable growth. A well-documented stylized fact is that societies with high institutional quality tend to be more prosperous," said the IMF report.

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