The coronavirus Covid-19 may force corrections to Latvia’s economic growth outlook, according to European Commission’s (EC) representatives in Latvia.
EC’s report on Latvia published on February 26 mentions that the country’s GDP growth may be 2.3% in 2020 and 2.4% in 2021.
Compared to the outlook for Latvia’s GDP growth in 2020 reported by EC in autumn 2019, the topical outlook has been reduced by 0.3%, from 2.6% to 2.3%.
EC’s topical Latvian economic growth outlook did not include the risks associated with the spread of the coronavirus, which, as previously reported by economists, might worsen Latvia’s GDP growth outlook for 2020.
EC representatives in Latvia admit the spread of the coronavirus and possible influence on global economy may force EC to review Latvia’s GDP outlook for 2020. Details will be known later in spring.
EC’s report on Latvia mentions that in spite of reduced investments the country’s economic activity remains stable.
The report mentions that the main reforms in Latvia are progressing well, but it remains problematic to ensure growth benefits all public classes. Although it is estimated investments will reduce, it is expected Latvia’s growth will remain stable thanks to a strong labor market, which contributes to private consumption growth, the report mentions.
EC admits that when looking from a long-term perspective, Latvia is only of Europe’s leaders when it comes to convergence. However, as the country becomes wealthier, its income growth will depend more and more on investments in human capital and innovations, whose contribution so far has been limited.
Public finances generally remain stable as the state debt reduces. Nevertheless, growth has not been fully inclusive, because inequality remains high and far-away regions in Latvia are behind Riga. Latvia’s main challenges for the next decade include reaching the average EU indexes, de-carbonization of the economy and more expansive distribution of growth benefits, as well as resolution of the problem of declining population, EC admits. (BNN/Business World Magazine)