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Commission Report (2002): Latvia
Macroeconomic development has been favourable in most respects.
GDP growth has been strong, steady and broad-based, underpinned by both
domestic and external demand. Only in 1999 did development deviate from this
trend, as the economy was hit by the Russian crisis, but the economy
succeeded in recovering rapidly. However, strong private consumption and
investment have lead to a large current account deficit. It has, nonetheless,
been covered by FDI to a large extent. In 2001, FDI fell considerably but
that was due to a single transaction by a domestic enterprise and it should
not be too emphasised. Despite strong domestic demand, inflation has remained
moderate and stable. The general government deficit has varied somewhat over
the years, with a peak in 1999. Since then, however, it has decreased every
year. Recent economic developments have, by and large, confirmed these
trends, although the weakening of external demand has started to influence
exports. The budget law for 2002 provides for an increase in the budget
deficit to 2.75% of GDP. So far, however, the actual deficit has been much
lower than that and in agreement with the IMF, the target for the year has
been set to 1.8% of GDP.
|
Main Economic
Trends |
|
Latvia |
1997 |
1998 |
1999 |
2000 |
2001 |
Average |
2002 latest |
|
|
Real GDP growth rate |
percent |
8.4 |
4.8 |
2.8 |
6.8 |
7.7 |
6.1 |
3.8 Q1 |
|
Inflation rate1 |
|
|
|
|
|
|
|
|
| -
annual average |
percent |
8.1 |
4.3 |
2.1 |
2.6 |
2.5 |
3.9 |
2.8 July
2 |
| -
December-on-December |
percent |
6.4 |
2.7 |
3.0 |
1.7 |
3.2 |
3.4 |
1.1 July |
|
Unemployment rate |
|
|
|
|
|
|
|
|
| -
LFS definition |
percent |
14.4 |
14.5 |
13.7 |
14.2 |
13.1 |
14.0 |
13.5 Q2 |
|
General government budget
balance |
percent of
GDP |
1.8 |
-0.7 |
-5.3 |
-2.7 |
-1.6 |
-1.7 |
|
|
Current account balance |
percent of
GDP |
-6.1 |
-10.6 |
-9.7 |
-6.9 |
-9.7 |
8.6 |
|
|
Million
ECU/EUR |
-305 |
-576 |
-599 |
-538 |
-8253 |
569 |
-275
Jan.-June |
|
Gross foreign debt of the whole
economy |
percent of exports of
goods and services |
20.6 |
70.6 |
111.8 |
100.0 |
: |
: |
|
| -
debt export ratio |
Million
ECU/EUR |
523 |
1,9684 |
3,052 |
3,546 |
: |
: |
|
|
Foreign direct investment
inflow |
percent of
GDP |
9.3 |
5.8 |
5.2 |
5.7 |
2.3 |
5.7 |
|
| -
balance of payments data |
Million
ECU/EUR |
460 |
318 |
324 |
442 |
198 |
348 |
304
Jan.-June5 |
| Sources:
Eurostat. National sources. OECD external Debt
Statistics |
|
-
Calculation of the CSB of Latvia based on the 2000 Population and
Housing Census provisional results.
- Moving
12 months average rate of change.
- Source:
Website of the National Bank.
- series
break as a result of some technical changes to the definition.
- Source:
Website of the National Bank.
|
Structural reforms have strengthened the performance of the economy, even
if the implementation of the reforms can be a challenge. An ambitious work to
improve the business environment began in 1999. An essential element was the
systematic involvement of the business community in the programming of
structural reforms, which has paid off in terms of a wide range of actions
undertaken. Legal certainty has been strengthened in the land market and in
the business sector. The privatisation process is almost completed, but the
process has gone much slower during the last years than initially planned.
Progress was made during the last year, but some large enterprises are still
awaiting their privatisation. With the introduction of a mandatory funded
pillar in 2001, the pension reform is now largely completed. The financial
sector has undergone substantial progress. Although financial intermediation
is still relatively limited, restructuring and consolidation of the sector
have gone far. Supervision of the financial sector has also been
significantly strengthened.
The transition to a market economy, and subsequent restructuring, has
contributed to a rise, though geographically uneven, of incomes. GDP per
capita in PPS reached 33.1% of the EU average in 2001. This measure shows
good progress made since the Opinion in the process of catching up to income
levels seen in the EU. However, growth has not been evenly distributed, but
largely concentrated to a few areas. This is reflected both in terms of GDP,
and in terms of unemployment. The Riga region reached close to half the EU
level in 1999, whereas some inland rural areas have significantly lower
levels. However, this measure, GDP per capita, do not fully reflect income
per capita, and should therefore be treated cautiously. The economic activity
rate![[*]](/bilder/icons/footnote.png) , around 68%,
and the employment rate, around 59% have been overall fairly stable. The
unemployment rates in some eastern districts are more than five times higher
than in Riga city. Unemployment rates for men are, by about 3 percentage
points, higher than those of women and have, unlike that for women not fallen
over the past years.
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Main Indicators of
Economic Structure in 2001 |
|
Population (average) |
Thousand |
2,355 |
|
GDP per head1 |
PPS |
7,700 |
|
percent of EU
average |
33 |
|
Share of agriculture2
in: |
|
|
| -
gross value added |
percent |
4.7 |
| -
employment |
percent |
15.1 |
|
Gross fixed capital
formation/GDP |
percent |
27.3 |
|
Gross foreign debt of the whole
economy/GDP3 |
percent |
45.7 |
|
Exports of goods &
services/GDP |
percent |
44.9 |
|
Stock of foreign direct
investment |
|
|
|
Million |
2,2844 |
|
EURper
head5 |
970 |
|
Long term unemployment rate |
percent of labour
force |
7.7 |
|
- Figures
have been calculated using the population figures from National
Accounts, which may differ from those used in demographic
statistics.
-
Agriculture, hunting, forestry and fishing.
- Data
refer to 2000
- Data
refer to 2000
- Figures
have been calculated using the population figures from National
Accounts, which may differ from those used in demographic
statistics.
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© European Commission
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