Latvia to keep position of Baltic growth leader

The European Commission forecasts a slight slowdown in economic growth for Latvia, though the Baltic country will retain the leading position by economic growth among the European Union candidate countries.

According to the EC's autumn survey about candidate countries economic development, Latvia's economic growth this year could be 5 percent, the highest among the candidate countries and unchanged from the previous forecast.

The EC now forecasts growth as high for Lithuania, up from a 4 percent forecast in its spring report.

For Estonia the GDP growth for this year is forecast at 4.5 percent, up by 0.5 percentage points from the spring forecast.

The EC said Latvia generated a superlative economic performance last year, but this year growth was affected by weak external demand, which is expected to gain strength next year.

The country's strong domestic demand that has so far cushioned the effect of the decrease in exports on GDP is expected to continue.

But, according to the EU survey, inflation will grow in Latvia over the coming years since, given Latvia's integration to the EU, prices are likely to increase. Inflationary growth should not exceed some 3 percent inflation expected in 2004.

Latvia's budget deficit also could get close to 3 percent of GDP because, although Latvia wants to curb the deficit, large spending is expected on integration in the EU and NATO, EU experts claim.

Aggregate GDP growth for the ten EU candidates expected to accede to the EU in 2004 will be some 2.1 percent this year, 3.6 percent next year, and 4.2 percent in 2004.

For next year the EC is predicting 5.5 percent GDP growth for Latvia, and for 2004 - 6 percent, the highest indicators among the EU candidate countries.

For Estonia the growth forecast for 2003 and 2004 is at 4.5 percent and 4.9 percent respectively, and for Lithuania - 3.5 percent and 4.5 percent.