Latvian economic growth to remain steady, says EC

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Latvia's economic prospects are broadly in line with the general trend across the European Union, according to the latest forecasts released by the European Commission November 7. 

"The European economy is now in its seventh consecutive year of growth and is forecast to continue expanding in 2020 and 2021. Labour markets remain strong and unemployment continues to fall. However, the external environment has become much less supportive and uncertainty is running high. This is particularly affecting the manufacturing sector, which is also experiencing structural shifts. As a result, the European economy looks to be heading towards a protracted period of more subdued growth and muted inflation," the Commission said of the situation across Europe.

On Latvia specifically, the Commission reported:

"Latvia’s economic growth is set to slow down to 2.5% in 2019. Private consumption is expected to remain the main growth driver over the forecast horizon as investments are expected to slow further in 2020 before picking up slightly in 2021. Export growth is set to remain modest due to weak external demand. Driven by increases in utility and food prices, inflation is forecast this year at 3.1% before cooling off in 2020 and 2021. The slowing investment is set to relieve labour demand somewhat, but the declining labour force is set to maintain a tight labour market. The government deficit is expected to remain at 0.6% of GDP through 2021."

"Despite bright prospects for agricultural products and services, export growth is expected to struggle in the face of weak demand in Latvia's main foreign markets," the Commission explained.

The detailed report is available to read online.

"The risks to the forecast are tilted to the downside as the slowdown in investment and exports may spill over to the labour market and therefore negatively affect private consumption. Moreover, the uncertainty related to the external environment could also impact export growth more sharply than currently forecast," it added.

The  European Commission expects Latvia's economic growth to reach to 2.6 percent next year and 2.7 percent in 2021. It will remain in the top half of EU national growth rates for the forseeable future, according to the EC.


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