Latvian Economy Contracts at Slowest Pace Since 2008 as Exports Increase
By admin at 9 August, 2010, 6:37 pm
| Tweet |
|
Latvian economic output shrank at the slowest annual pace in two years in the second quarter as exports and manufacturing expanded.
Gross domestic product fell 3 percent after a 6 percent decline in the first quarter, the central statistics office in Riga said in a flash estimate sent by e-mail today. The median estimate of five economists in a Bloomberg News survey was for a 3.4 percent contraction. The economy expanded a seasonally adjusted 0.1 percent on the quarter.
The figures pave the way for Latvia to resume annual growth in the second half, Prime MinisterValdis Dombrovskis said today. The economy of the Baltic nation emerged from the European Union’s deepest recession in the first quarter.
“The good news is that the economy didn’t contract, it had quarterly growth, but only marginal,” said Martins Kazaks, chief economist at Swedbank AB’s Latvian unit in Riga. “The economy is still fairly fragile as domestic demand is still relatively weak. The key growth agent is still exports.”
Swedbank predicts a contraction of between 2 percent and 2.5 percent for all of 2010, compared with a forecast for a 3.5 percent decline by the International Monetary Fund and European Union.
Recession ‘Overcome’
“The recession has been overcome and there are grounds to say that in the second half Latvia’s economy will finally return to growth, both quarterly and annually,” Dombrovskis said in astatement released by his office today.
Manufacturing grew 6 percent in the second quarter compared with the previous three months, Dombrovskis said in the statement.
Latvian consumer prices fell for a tenth month in July, dropping 0.6 percent compared with a year earlier, the statistics office said today. The country’s trade deficit widened to 83.7 million lati ($157 million) in June, the office said in a separate release.
The Latvian economy shrank 18 percent last year and the country was forced to turn to a group led by the IMF and the EU for a 7.5 billion-euro ($10 billion) loan after its second- biggest bank needed a state rescue and a debt-fueled property bubble burst.
The government opted to keep the lats pegged to the euro and avert a devaluation, aiming to boost competitiveness through wage cuts and deflation. Growth in Western European economies is expected to further spur Latvia’s recovery.
Offered rates on the three-month Rigibor, the interbank lending rate, were 1.29 percent on Aug. 6, compared with a peak of 29.8 percent in June last year when there was speculation the country would be forced to devalue.
The Baltic states of Estonia, Latvia and Lithuania were the fastest-growing economies in the EU in 2006 as banks poured money into the region, sparking a real-estate and consumption boom. By 2009, the region was the worst hit in the bloc after credit markets froze.
The statistics office will release revised data for the second quarter on Sept. 8.
No comments yet.