Latvian central bank: economy has weathered COVID-19 better than most EU countries

Latvian central bank (Latvijas banka, LB) published its regular monthly Macro Profile on October 23, giving an overview of the state of the national economy.

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"So far, Latvia's economy has weathered the COVID-19 crisis better than most European Union (EU) countries," LB said.

"Over the second quarter of 2020, Latvia's GDP fell by 7.1%, i.e. less than previously projected by Latvijas Banka. Factors such as balanced economic growth and sound government finances before the crisis, accommodative monetary and fiscal policy implemented already at the outset of the crisis as well as timely unwinding of the pandemic-related restrictions supported an improvement in the market participants' sentiment and, in the summer, led to a rapid recovery of several economic sectors like retail trade, manufacturing and exports of goods. These developments give reason to anticipate a less pronounced fall in GDP in 2020 (–4.7%) than estimated in the first half of the year. At the same time, uncertainty about the global development remains high," LB said.

Long-term prospects are actually quite positive, the report says, with "around 5% growth in both 2021 and 2022. Information and communication services whose contribution to services exports has tripled since the previous crisis (15% in 2019) could retain growth duethe strong demand for information technology solutions triggered by the crisis."

The full report is available to read online in English as well as Latvian and is also attached to this story in PDF format. Should you also like to be informed about other news published on LB's macroeconomics site you can subscribe to the newsletter of Macroeconomics.lv in Latvian or English.

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