OREANDA-NEWS. March 16, 2009. The dataindicate that during the last quarter of 2008 the Latvian GDP has decreased by 10.3%, in comparison to the corresponding period of the previous year. All branches of the economy, except for the government and defence sector, are facing the decrease phase, reported the press-centre of Latvijas Krajbanka.

The decrease tempos of some sectors are dramatic, including retail trade, civil engineering and financial services – the branches, which recently furthered the two-digit growth of the Latvian economy. The processing industry, which did not stand out with high development tempos also during the economic boom, is demonstrating rapid decline – by 11.5%.

In the result of which the branch proportion in the Latvian economy has diminished up to 9.2%, which is the lowest indicator since restoration of Latvian independence. Several times we have emphasized that the level of industrial branch is the main precondition for sustainable development of the state, which is especially important in the today’s economic situation. Although the situation in Latvian industry is very critical, it is important to use the time of global crisis to eliminate obstacles, hindering efficient production and export for Latvian entrepreneurs. Only in that case we will mot miss a possibility to get out of the pit together with other countries.

In 2008 the amount of Latvian economy decreased by 4.6%. The tendencies indicate that this year the decline will be much deeper. Nevertheless it is almost impossible to model and forecast precisely how big the decline if GDP could be expected.

There are too many unknown – unfinished government formation process, budget aim (non) fulfilment, and further activity of the international lenders towards Latvia, etc. By optimistic scenario (all this problems are solved quickly and efficiently) the decline of DGP could comprise a bit over 10%. Unfortunately, there is a little hope for such a scenario, besides there is to much uncertainty regarding economic perspectives in the European and CIS region, in the result of which the Latvian economy might show mush worse results in 2009.

The discussion regarding how quickly will we “reach the pit” is also open to question. Unfortunately, the painful decline of consumption and domestic political processes, heavy recession in European countries and soon also in the biggest countries of CIS, do not allow to see the factors, which would indicate on the possible recovery of the economy during the next year.