Latvian economy could shrink 10% this year - central banker

The decline in the Latvian economy this year could also exceed 10 percent, but the consequences of such a decline in gross domestic product (GDP) will be completely different from the previous economic crisis, the Governor of the Bank of Latvia Mārtiņš Kazāks said in an interview with Latvian Television April 21.

He emphasized that there is much uncertainty at the moment, so it is not possible to accurately predict the extent of the economic slowdown.

"It is far too early to talk about very specific figures, because we do not know when and how the spread of the virus will end. (..) Uncertainty is very high. At the moment, the story is more about whether this year 's slowdown will be in the single digits, or slip into the double digits," said Kazaks.

He mentioned that the economic downturn would be determined by three factors: how long the current restrictions would last, how effective and widespread support mechanisms would be to allow businesses and citizens to ''hibernate'' the crisis, and the extent to which the economy will be "depleted" during the crisis so that it could recover afterwards.

"This is not the crisis of 2008 and 2009, when there was a huge shortage of money. At this point, the state has enough money and the state can provide the necessary support," Kazaks said.

As previously reported, the International Monetary Fund has revised Latvia's gross domestic product projection for this year, and now expects Latvia to post steepest economic downturn in the Baltics in 2020, while next year Latvia is projected to achieve the fastest economic growth in the Baltic countries.

The IMF's latest World Economic Outlook predicts that the Latvian economy will contract by 8.6 percent this year, instead of growing by 2.8 percent as the IMF estimated last October. Next year, the IMF projects Latvia's GDP growth at 8.3 percent, which will be the fastest among the Baltic countries. 

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