OREANDA-NEWS. May 15, 2009. Demand, which continues to diminish due to the growing unemployment and lower incomes, reflects in the dramatic 18% decline of the Latvian economy during the first quarter, reported the press-centre of Latvijas Krajbanka.

Those are direct consequences of the diversification of weak economy and the growth experienced during the previous years, which were mainly based on the consumption. Now retail, construction and real estate sectors continue to demonstrate greater minuses.

At the same also external factors play an essential role. This is how a global economic recession is negatively reflecting in the Latvian export indices. Besides, high energy tariffs, the fact that lat got stronger towards separate trade partners` currencies, and the collapse of the domestic consumption have to be considered. Under such circumstances, the manufacturing amounts have diminished by almost a quarter within a year.

However, the lowest point of economic recession has not been reached yet, and the further GDP dynamics will be influenced by several factors, including decrease of budget costs and terms of international loan reception. Under such circumstances, it is important to set objectively achievable budget revenue and expenditure aims, which would allow avoiding new negotiations on the change of the terms of recurrent loan reception. At the same time, the involvement of private sector in the strategic development has to be considered, as well as the priorities of the sector have to be defined and the intensive support has to be ensured.

Otherwise, the relatively rapid expected recovery of the European economy and the world’s market will not bring the anticipated effect in Latvia, but the GDP drop by 15% in 2009 will become the most optimistic from the possible scenarios. Even if the IMF funding reception terms will be relatively favourable it can be predicted that in 2009 the decline of GDP will reach or even exceed the limit of 20%.