Finance Ministry cuts Latvia’s economic growth forecast for 2020

The Finance Ministry has left Latvia’s GDP growth forecast for this year unchanged at 3.2% but has revised downwards its economic growth forecast for 2020, the ministry’s representatives informed the government.

As it is starting work on Latvia’s 2020 budget and the medium-term budget framework, the Finance Ministry has updated its macroeconomic and budget forecasts for 2020-2022.

According to the ministry’s latest prognosis, the Latvian economy will growth by 3.2% this year. In 2020, the annual growth rate will slow down to 2.8%. The new forecast for next year has been reduced by 0.2 percentage points from the previous forecast. The GDP growth rate is expected to remain the same also in 2021 and 2022, down 0.1 percentage points from the previous prognosis. The latest estimates were drawn up in June 2019 based on Latvia’s GDP data for the first quarter of this year and the short-term macroeconomic information available in June 2019.

Finance Minister Janis Reirs (New Unity) commented that after two years of strong economic performance, the growth rate has become slower amid a stabilizing flow of investment, a slower growth of the global economy and some one-time factors like a drop in electric power generation at Latvia’s hydroelectric power plants and decreased activity in the real estate sector.

Average annual inflation is projected at 2.8% in 2019 and 2.5% in 2020. Compared to the projections included in Latvia’s Stability Program 2019-2022, the inflation forecast for 2019 has been raised by 0.3 percentage points, primarily because of a steeper increase of energy prices and a weaker euro. The inflation forecast for 2020 has also been raised by 0.3 percentage points to 2.5%. For 2021 and 2022 the inflation forecast has been left unchanged at 2.1% and 2% respectively.

The Finance Ministry expects the number of employed residents to grow by 0.5% and unemployment to drop to 7% this year. Next year, the number of employed residents is expected to remain stable and the unemployment rate to slip to 6.6%. In 2020, the jobless rate is expected to be down to 5.7%.

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