OREANDA-NEWS. November 13, 2008. As it was expected, during the third quarter of 2008 Latvian economy experienced decline – for 4.2%, reported the press-centre of Latvijas Krajbanka.

Unfortunately, quick evaluation figures don’t allow analysing situation in separate sectors, although it is obvious that the decline or considerable slowdown of development tempos are observed in almost all sectors of economy.

Unfortunately, quick value added decrease is shown also by industry and those sectors, which previously ensured two-digit rise of Latvian economy. It is important to note, that the amount of product tax has declined considerably, which is one of the reasons for the GDP decrease.

It is clear, that Latvian economy entered the recession phase, which is determined by inland consumption and decline of company investment activity, as well as unfavourable outer factors. The world is in the epicentre of the financial crisis, and the economic development of the main Latvian trade partners is showing slowdown signs.

Already now Estonia is experiencing the decline of gross domestic product, Lithuanian economy is showing rapid decrease of development tempos, while European countries are at the recession threshold. No doubt, that unfavourable situation in European economy and decline of activity in CIS countries influences Latvian manufactured and exported goods badly.

This tendency allows concluding that this year Latvia will have another record, namely, the most rapid decline tempo of GDP. If in 2007 Latvian economy demonstrated 10% growth, then in 2008 there will be decline for several percentages. Next year the GDP can decline by another 5%.

Unfortunately, in the existing situation, when it is not clear how the financial crisis will develop and how tough the situation will be in the world’s economy, the real digits can be even worse. A lot depends on how effectively the governments of European countries and ECB will be able to overcome the crisis situation, as well as how rough the economic development tempo decline will be observed in the CIS countries.

We are often asked – how this quite general index – the decline of GDP – will influence Latvian residents. Firstly, this decline will definitely affect the situation on the labour market: along with the reduction and even interruption of company activity the unemployment level will grow. Considering that fact, that economic situation in Great Britain and in other European countries, to where traditionally went Latvian labour force, is not as great as it was before, the employee proportion in 2009 can exceed two-digit number.