New Country Reports research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 07/09/2013 -- Latvia's economic recovery will continue into 2013 and beyond, although we emphasise that strong headline real GDP growth is largely a result of statistical base effects. Uncertainty and rising unemployment will also hit household consumption at a time when the government remains firmly committed to fiscal austerity.
We anticipate the moderation in consumer prices in Latvia to remain in place throughout 2013 before picking up slightly in 2014. We forecast inflation to average 1.0% in 2013 and 1.6% in 2014, down from an expected 1.9% in 2012. Given the weak state of the domestic economy, we believe imported inflation will be a key driver of price pressures this year.
The Latvian government's commitment to joining the eurozone remains firmly intact, and we view the government's target date of 2014 as increasingly plausible. However, we expect that the Latvian public's negative view towards the currency bloc will pose challenges for the government to convince the electorate. Nonetheless, we believe that the positive economic benefits accession will bestow on Latvia will tip the balances in the government's favour.
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Major Forecast Changes
We have revised down our inflation expectations, and now expect consumer prices to grow by an average of 1.0% in 2013 and 1.6% in 2014, from a previous forecast of 2.2% and 2.0% respectively.
We have upgraded our forecast for real GDP growth in 2013, which we now expect to arrive at 3.5%, from a previous forecast of 4.3%.
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