Waidewut
05-15-2012, 08:06 PM
There is life after austerity. Latvia on Thursday reported 6.8 per cent GDP growth in the first quarter of 2012, the fastest rate in the EU.
The small Baltic state suffered the worst recession in Europe, when GDP collapsed by by nearly 25 per cent in 2009-10. But a tough austerity programme has helped stabilise the economy, pave the way to recovery and put Latvia in a position to possibly join the euro. A lesson for Greece if ever there was one.
According to preliminary data, GDP growth came in well above forecasts, which averaged 4.5-5 per cent. Danske Bank said in a research note: “We had expected a gradual slowdown based on the less favourable external outlook but it seems that the Latvian economy is more resilient to the euro area problems than expected.”
Growth was boosted by strong domestic demand and by exports to other growing economies in north east Europe, including Estonia, Lithuania, Poland and, above all, Russia.
The recovery is now expected to slow rapidly, with economists forecasting around 3 per cent for the year as a whole. That will leave the Latvian economy some 12 per cent smaller than it was before the 2008 crisis. Adn despite recent improvements, the unemployment rate remains high at 14.3 per cent.
But many economists argue that the pre-crisis economy was, like some others in eastern Europe, inflated by an unsustainable property bubble, fuelled by cheap credit. With that “unhealthy” growth gone, the property sector much reduced, and inflation running at just 2.8 per cent last month, Latvian officials say the economy is now far sounder and well on its way to meeting the criteria for entering the eurozone. They hope to join in 2014.
Whether they meet the Greeks on the way out remains to be seen.
http://blogs.ft.com/beyond-brics/2012/05/10/latvia-tops-eu-gdp-growth-league/#axzz1uyElOdWe
The small Baltic state suffered the worst recession in Europe, when GDP collapsed by by nearly 25 per cent in 2009-10. But a tough austerity programme has helped stabilise the economy, pave the way to recovery and put Latvia in a position to possibly join the euro. A lesson for Greece if ever there was one.
According to preliminary data, GDP growth came in well above forecasts, which averaged 4.5-5 per cent. Danske Bank said in a research note: “We had expected a gradual slowdown based on the less favourable external outlook but it seems that the Latvian economy is more resilient to the euro area problems than expected.”
Growth was boosted by strong domestic demand and by exports to other growing economies in north east Europe, including Estonia, Lithuania, Poland and, above all, Russia.
The recovery is now expected to slow rapidly, with economists forecasting around 3 per cent for the year as a whole. That will leave the Latvian economy some 12 per cent smaller than it was before the 2008 crisis. Adn despite recent improvements, the unemployment rate remains high at 14.3 per cent.
But many economists argue that the pre-crisis economy was, like some others in eastern Europe, inflated by an unsustainable property bubble, fuelled by cheap credit. With that “unhealthy” growth gone, the property sector much reduced, and inflation running at just 2.8 per cent last month, Latvian officials say the economy is now far sounder and well on its way to meeting the criteria for entering the eurozone. They hope to join in 2014.
Whether they meet the Greeks on the way out remains to be seen.
http://blogs.ft.com/beyond-brics/2012/05/10/latvia-tops-eu-gdp-growth-league/#axzz1uyElOdWe