RIGA - Although Latvia’s joining the eurozone in 2014 is still included in Swedbank experts’ basic scenario, it is threatened by serious risks, the bank’s economy study concludes, reports Nozare.lv.
“The goal is particularly difficult because a balance between the reduction of inflation and the budget deficit has to be found. If the economy continues to grow and a consolidation of 110 to 130 million lats (157.1 – 185.7 million euros) occurs, the 2012 budget deficit might not exceed the three percent level. However, if the worst case scenario comes into effect and global growth sharply declines, negatively affecting the Latvian economy, additional fiscal consolidation will be necessary to fulfill Maastricht budget criteria” the bank’s experts believe.
Taking into consideration the previous consolidation and the increasing weariness of reform implementation among the population, the fulfillment of the task might be very difficult. But the slowdown of the global economy’s growth rate will mean less pressure on Latvia’s inflation because raw material prices in global markets will have decreased.
The bank’s basic scenario forecasts a limited drop in prices in 2012 and 2013, and, at the beginning of 2013, Latvia’s average annual consumption price inflation is expected to be within 2 to 2.5 percent.