Latvia's economic recovery will continue in 2016, although we emphasize that labour market improvements are partly the result of high levels of emigration.
We see small but growing scope for the government to ease up on its long-held policy of fiscal austerity going forward.
The Russian embargo on EU agricultural goods has weakened the growth outlook and Latvia will be among the worst EU states affected.
Growth will remain subdued due to the need for further deleveraging.
Major Forecast Changes
We have downgraded our medium-term growth outlook, and forecast average real GDP growth of just 3.0% between 2017 and 2020, from a previous forecast of 3.4%.
The prevailing risk to our forecasts for Latvia remains the persistent eurozone sovereign debt crisis. A further deepening of the crisis would pose downside risks to most of our forecasts.
|Real GDP growth, % y-o-y||2.3||2.8||3.0||3.3|
|Nominal GDP, EURbn||23.4||24.1||25.0||26.2|
|Consumer price inflation, % y-o-y, eop||0.3||-0.1||0.8||2.9|
|Exchange rate EUR/USD, eop||0.83||0.95||0.91||0.87|
|Budget balance, % of GDP||-1.6||-1.2||-1.2||-0.9|
|Current account balance, % of GDP||-1.6||-1.4||-1.4||-1.3|
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