RIGA - Foreign analysts have a high opinion of Latvia’s 6.8 percent gross domestic product (GDP) growth in the first quarter of 2012, which has exceeded all forecasts, reports LETA. Commenting on Latvia’s economic growth in the first three months of the year, the British newspaper Financial Times points out that “there is life after austerity.”
“The small Baltic State suffered the worst recession in Europe, when GDP collapsed by nearly 25 percent in 2009-2010. But a tough austerity program has helped stabilize the economy, pave the way to recovery and put Latvia in a position to possibly join the euro. A lesson for Greece if ever there was one,” writes the business daily.
Business magazine BusinessWeek of the Bloomberg group writes that, according to preliminary data, GDP growth came in well above forecasts, which averaged 4.5-5 percent.
Danske Bank points out that Latvia’s economic growth accelerated in the first quarter to maintain the fastest pace in the European Union, suggesting that the Baltic nation is weathering the continent’s debt crisis. According to Danske Bank chief Baltic economist Violeta Klyviene, Latvia’s economy is doing “miracles.”
“These are exclusive trends in the EU context. Growth is balanced, driven both by positive domestic and external demand. Latvia’s export structure is rather balanced, which provides hope that exports will remain the key driver of economic growth despite turbulence in the euro area,” explains the bank.
Nordea Markets analyst Annika Lindblad says: “The Latvian economy has not yet been significantly affected by the slowdown in the euro area. Latvia’s main trade partners are not among the most vulnerable economies and the domestic economy has held up well. Activity in the first quarter was likely supported by continued growth in the export sector as well as domestic demand.”
Capital Economics Ltd. economist Liza Ermolenko writes that “today’s data should ease fears of contagion from the eurozone crisis in Latvia. The breakdown is likely to reveal that the domestic economy continued to strengthen in the first quarter, driven by robust growth in investment and consumer spending. This is certainly good news given that investment is still well below its pre-crisis levels.”
In the first quarter of 2012, Latvia’s GDP increased 6.8 percent from the first quarter of 2011 (seasonally non-adjusted data), according to the Central Statistical Bureau’s flash estimate. Compared to the fourth quarter of 2011, the GDP increased 1 percent in the first quarter of 2011, according to seasonally adjusted data.
Prime Minister Valdis Dombrovskis (Unity) joined in the positive chorus as well, highlighting on May 10 that Latvia’s economic growth figures in the first quarter of the year are “very positive and have exceeded expectations, which means that we most likely will have to review economic growth forecasts in June.”
Finance Minister Andris Vilks (Unity) said that, taking into account budget revenue figures, positive growth trends are likely for the second quarter of the year as well. “The first half of the year will be very good. However, growth in the second half of the year will be dependent on external factors - the situation in Greece and Spain,” the minister said.
The growth in industry of 11 percent and in trade of 10 percent had a positive effect on the GDP; also, the volume of collected taxes on products increased 20 percent. The construction sector continues to grow as well.