We have to be ready for a new crisis - Bank of Latvia head

Even though Latvia's GDP is still growing, the growth pace is slowing down, and Latvia has to be ready for a potential new economic crisis, Bank of Latvia President Ilmārs Rimšēvičs told Latvian Television Friday. 

He said that Latvia's economy is cooling down, just like the economy of the Eurozone. He said that this year's inflation prognosis could be revised to "close to zero" from the previous estimate of 2%.

"The Latvian economy is sadly cooling down too, and we have to be ready for the worst. We have to learn from the previous crisis.

[..] Everything can change in a matter of months. So we have to be ready for it," said Rimšēvičs.

He commented the new European Central Bank zero interest rates unveiled Thursday as "unprecedented", saying he hopes that these measures will help stabilize the situation in the Eurozone. 

"However it's obvious that economies are cooling down, and the European Central Bank, by printing money and increasing the amount of money in circulation, cannot lead the European countries out of a crisis and stagnation," said Rimšēvičs. 

He said that Latvia has to focus on increasing competitiveness and state management, as well as review spending and use funds more effectively.

The state should "immediately" start talking with private banks over why they aren't lending the resources at their disposal.

Earlier estimates from the Finance Ministry put Latvia's 2016 GDP growth at 3%, inflation at 2%, and budget deficit at 1%. However the figures will have to be revised, according to Rimšēvičs. 

Rimšēvičs also shrugged off a question whether Latvia has become a haven for money launderers.

"It's a coincidence that so many things are happening at once. I think it's related to the work schedule, which for the regulator is usually in spring, and one shouldn't make such assumptions prematurely," he said.

On Wednesday Latvia's financial regulator, the Financial and Capital Markets Commission, slapped a huge fine on yet another boutique bank - the Baltic International Bank.

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Economy
Economy