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Latvian economy could crash, says mag

  • 2007-07-11
  • By Mike Collier
LONDON 's For the second time in as many weeks, the economies of Eastern Europe in general and the Baltic region in particular have come under the critical microscope of British financial magazine The Economist.

Commenting on the ill-preparedness of many Eastern European states should the economic outlook take a turn for the worse, the magazine singles out Latvia for particular criticism in its July 5 edition.

Describing Latvia as "a financial pipsqueak," The Economist points out that Latvia's combination of a large current account deficit, spiralling wage demands, high inflation and weak government makes it "the country that most troubles outsiders."

Expressing the opinion that Latvia is the prime for a meltdown because "the government is keener on harvesting the dividends of double-digit GDP growth than on acting to avert the risk of a crash," The Economist also notes that any Latvian collapse could have a knock-on effect and that "the likeliest route for contagion would be to next-door Estonia. It is also overheating, but its somewhat more responsible government has a modest budget surplus."

Articles in The Economist are widely read within the financial community and Baltic businesses will be hoping that this one isn't enough to dissuade investors from putting their money into the region.