OREANDA-NEWS. April 21, 2011. The lowest point of crisis in Latvia was certainly reached at the end of April and beginning of May 2010, which is evidenced by official indicators, in particular, growth of GDP in the second half of 2010. That growth was caused first of all by successful performance of Latvian exporters (overall growth in processing industry in 2010 amounted to 17.9%), partial recovery of trade (growth by 10.6% in 2010, mainly due to sale of various machinery), and services related to the tourist industry (mainly, hotels and food services; total growth in 2010 – 8.1%).

Recovery of Latvian economy is slowed down by the factors that affect the overall level of consumer prices, such as rising global prices on fuel and food, as well as by internal reasons: both fiscal (increase of VAT by 1% and of the preferential rate of the same tax by 2%, upcoming increase of the excise tax on tobacco, alcohol and fuel) and monopolistic ones (climbing tariffs of such companies as Latvenergo, Sadales Tikls, and Latvijas Gaze). Weak domestic demand also has to be taken into consideration, which can be explained by still high unemployment (14.4%), continuing consolidation of the state budget, and post-crisis momentous cautiousness of the population.

The combined effect of both aforesaid categories of factors can be seen, for example, in very slow recovery of the transportation industry (overall growth in 2010 – only 1.6%): while the cargo transport has increased 11%, passenger transport, to the contrary, has dropped 7%.

On average, taking into consideration gradual recovery of the global economy (not very vigorous though – 2% to 3% a year – and not happening everywhere), on the one hand, and factors hindering the pace of economic development in Latvia, on the other hand, we anticipate that GDP in Latvia in 2011 will add around 3.5%, which translates into additional average 60 million lats a quarter (comparable prices of 2000) and going back to the overall level of 2005.

Forecasts of different experts regarding Latvian GDP in 2011, both Latvian, and international, practically match: the forecast of the Association of Latvian Commercial Banks is 3.6%, Ministry of Economics – 3.5%, Ministry of Finance – 3.3%, Bank of Latvia – 3.3%, IMF – 3.3%, European Commission – 3.3%, and the rating agency Fitch Ratings – 3.5%.