SEB: stimulus funds "crucial" to Latvia's recovery

SEB bank has warned that in 2020, GDP decline will be larger in Latvia than in neighbouring countries, but that the prospects for the post-pandemic environment are fairly positive.

In its latest Nordic Outlook, published November 10, SEB says "Stimulus programs were modest but still managed to slow the upturn in unemployment. We expect an export-led recovery."

"Latvia’s economy had a solid rebound in the third quarter. As the number of new COVID-19 cases increases, the recovery is likely to stall over the next six months. Continued fiscal and monetary relief measures, as well as selective use of restrictions, will prop up the economy. That said, we expect GDP to shrink by 4.6 per cent this year and resume growth by 4.3 per cent in 2021. Despite a resilient labour market, unemployment will peak at 9.5 per cent before turning lower," the bank predicts.

Stimulus by the government will be "crucial" to get the economy moving again, the bank said: "In the next couple of years, investments and construction will be propped up by the EU Recovery Fund and the Rail Baltica project, but in the short term the release of EU funds may lag, and the government should increase its capital spending."

The full report is available to read online.

 

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