
Foto: Kaspars Krafts, F64.
Recently it was confirmed that the growth of the Latvian economy slowed further, to just 2.5% year-on-year, the slowest rate of growth for four years.
The only surprising thing about this is that it seems to have surprised some observers but as I tried to argue recently, where is growth supposed to come from?
Forecasts are not adjusted on a whim, nor should they be, but the Ministry of Finance's forecast (at the time of writing the one for June 2014)of 4% growth this year is just not going to materialize. With annualized growth of just 2.8% and 2.5% for the first two quarters of 2014, the economy would have to grow 5.2% on average for the last two quarters and that is just not going to happen - if anything, the external environment is deteriorating e.g. due to the newly imposed Russian sanctions although the impact on Latvia will be nowhere - NOWHERE!! - near this ridiculous "estimate" of 50% of GDP.....