RIGA - The current Covid-19 crisis is an "external economic shock", which has been caused by the pandemic and the related restrictions introduced in the European Union (EU), the European Commission's Executive Vice President Valdis Dombrovskis told LETA.
The EU commissioner underlined that this crisis is therefore not a result of previous economic imbalances but is directly connected to the pandemic and restrictions in member states.
Asked if he agrees to the opinion that Latvia is investing too little in its economic recovery, which in the future can cause Latvia to fall behind other countries, Dombrovskis noted that the EU economy was projected to shrink by 7.4 percent last year and grow 4.1 percent in 2021. As for the Latvian economy, Latvia has been forecast to lose 5.6 percent of its GDP in 2020 and to show 4.9 percent growth this year.
That means that there are no grounds to claim that Latvia is falling behind other countries in terms of economic growth as Latvia's economic downturn is expected to be smaller than the EU average and the recovery stronger than the EU average, Dombrovskis said.
"Of course, these are only forecast and there is great uncertainty about the economy. We are experiencing the second wave of the pandemic and Latvia, too, has significantly tougher restrictions than during the first wave. This is having a negative effect on the economy and forecasts are changing along with the economic situation," Dombrovskis said.
Commenting on economic support measures, the European Commission's executive vice president said that Latvia is taking the opportunities provided by the EU and also its own budget. He indicated at the same time that these support measures have to be precisely targeted and limited in time to prevent the situation where they become a constant burden on the budget.
"In any case, it is clear that in 2020, the budget deficits and government debt will have substantially increased in all countries, so it will be necessary to figure out how to ensure fiscal sustainability in the medium term," Dombrovskis concluded.