Latvia Country Risk Report Q1 2016
Latvia’s economic recovery will continue in 2016, although we emphasise that labour market improvements are partly the result of high levels of emigration.
We see small but growing scope for the government to ease up on its long-held policy of fiscal austerity going forward.
The Russian embargo on EU agricultural goods has weakened the growth outlook and Latvia will be among the worst EU states affected.
Growth will remain subdued due to the need for further deleveraging.
Major Forecast Changes
We have downgraded our medium-term growth outlook, and forecast average real annual GDP growth of just 3.0% between 2017 and 2020, from a previous forecast of 3.4%.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks
- Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Political Overview: Rising Defence Spending Incurring Public Opposition
- Security and external threats will dominate the bearing of Latvia's political risk outlook for the foreseeable future, while policymaking and
- continuity will remain stable.
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Slower Growth And Ethnic Tensions Key Themes To 2024
- The coming decade for Latvia will be marked by the scars of the global financial crisis of 2008/09.
- Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Household Confidence Growing
- The economic outlook remains stable over the short term, although weaker demand from Russia is dragging on the industrial sector.
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- External Trade And Investment Outlook
- External Liabilities To Remain Persistently Large
- While we forecast Latvia's current account deficit to remain small, the country needs to run a current account surplus if it is to unwind its
- external vulnerabilities. This is particularly true now as household deleveraging is slowing.
- TABLE: CURRENT ACCOUNT
- Fiscal Policy and
- Public Debt Outlook
- Public Debt To Decline
- Latvia will continue to run small fiscal deficits for the foreseeable future, but the debt/GDP ratio will continue to fall as a result of strong
- Structural Fiscal Position
- TABLE: FISCAL POLICY
- TABLE: GOVERNMENT REVENUE & SPENDING SOURCES
- Chapter 3: 10-Year Forecast
- The Latvian Economy To 2024
- Looking For A 'New Normal'
- After three years of growth outperformance following one of the worst recessions in Europe, we think growth is set to shift down a
- gear over the next 10 years, despite the country's accession to the eurozone, as it struggles with competitiveness and demographic
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- Labour Market Risk
- TABLE: DEVELOPED STATES - LABOUR MARKET RISK
- Logistics Risk
- TABLE: DEVELOPED STATES - LOGISTICS RISK
- Crime And Security Risk
- TABLE: DEVELOPED STATES - CRIME AND SECURITY RISK
- Trade And Investment Risk
- TABLE: DEVELOPED STATES - TRADE AND INVESTMENT RISK
- Chapter 5:BMI Global Macro Outlook
- Global Outlook
- Exit The Dragon
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %