The end ain’t nigh

  • 2010-10-13
  • By Stephan Eberhardt, Riga

 The recession is over! Or so says our prime minister, the IMF and others. Considering that, from 2008 until now the Latvian GDP has dropped a total of 25 percent, I’d say we’re in a depression, not a recession.
Finance Minister Einars Repse says that, based on 0.3 percent growth in the first quarter and 0.1 percent growth in the second (2 consecutive quarters traditionally defines the end of recession), this shows the end is here. However, these numbers are still subject to revision, either up or down. Then consider statistical error, which means that these meager growth numbers may actually be overstating true growth, or even masking continued decline.

This announcement is a bit premature. After a 25 percent GDP collapse, with unemployment (for those who haven’t already fled the country) at around 15 percent (173,000 people), a stabilization or slight rise in GDP doesn’t mean that the pain is over.

Let’s not forget that, when it actually arrives, the technical “end of the recession” doesn’t mean that the good times are rolling again. The end of the recession only means that the sliding has stopped.
We’ve lost almost one-third of our economic output in this crisis. Gone. Growth now of 0.1 percent, or even the “expected” 3-5 percent, means that it will take years to return to full employment levels, restore wages and attain full use of industrial capacity. Latvia is still an economic disaster zone with plenty of work still ahead.