Latvian economy is adjusting to pandemic, says bank expert

The economy is beginning to adjust to the pandemic caused by Covid-19, and it is happening relatively successfully in Latvia, Andris Vilks, member of the Bank of Latvia, said in an interview to Latvian Radio August 31.

“It is clear that we must live with the pandemic. Most likely it will not get worse, economies will not be shut down. Evidently, one can start planning different activities. We've figured out what we live in and just have to put up with it, adjust. This means that economic development will go ahead,” Vilks said.

Currently, the Bank of Latvia forecasts that economic growth will exceed 3% this year. 6.5% growth is forecast for the next year, which could in reality prove smaller, Vilks said.

The unknown variable is inflation, which could be persistent both globally and in Latvia. Higher inflation could persist for several quarters, but not for several years, according to the expert.

Vilks highlighted external demand as important, which allows Latvian exporters of goods to continue to work successfully and increase volumes. This is due to the large support in the euro area on the part of national governments, the business outlook, and the influx of large European Union funds.

“That fall of last year when relatively less was consumed in terms of goods and services, it is coming back. So there is a desire to spend, build, invest. Deposits in Latvia and other countries have also grown. Banking accounts have accumulated funds for both households and entrepreneurs,” said Vilks.

 

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