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Economy Ministry of Latvia prognosticates 10%-13% GDP drop in 2009

By Editor . 23.12.2008

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Prime Minister of Latvia Ivars Godmanis  criticized the report and assigned Economy Minister K.Gerhards to include in the next report also economic development projection, expressed by representatives of the sector, for example, producers and retail traders, writes LETA.

The informative report states that the prognosis for year 2009 was made taking in consideration weak external demand, which results from the global financial crisis, as well tumbling domestic consumption, which is due to reduced availability of loans. It is expected that the volume of crediting will be half of that of 2007 and of the first half of 2008. The volume of investment and private consumption will shrink; the sectors that will contract the most, will be the manufacturing industry, construction and trade. GDP fall will start to slow down in the second half of 2009.

The lower domestic consumption volume will contribute to improved foreign trade balance. In 2008, import volume dropped significantly, whereas the export volume slightly grew.It is possible that the financial crisis in Latvia will be even worse next year. If the above-mentioned threats all become reality, GDP could fall 10-13% next year and deflation could start, which will aggravate the crisis even more, the ministry predicts.