Foto: Ģirts Ozoliņš, F64.
Latvia is, together with Estonia, Lithuania, Denmark, Austria, Luxembourg, the Czech Republic and Slovakia, member of a rather exclusive club of EU countries that are neither being monitored due to macroeconomic imbalances, nor due to being in an Excessive Deficits Procedure.
Very fine, not least given the IMF and EU programme from which it exited in 2012 and certainly worth keeping that way. The Latvian economy does indeed not display any serious short run imbalances right now but there are still a few areas worth watching. One of them could be external competitiveness, i.e. the development in prices or costs of production here in Latvia compared to similar developments in trading partner countries; that is what the Real Effective Exchange Rate REER) does - an increase in this measure implies Latvian prices/costs running faster than abroad and thus a loss of competitiveness that makes it troublesome to be an exporter.