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Central bank cuts Latvia's GDP growth forecast for 2015 to 2 pct

Xinhua, January 14, 2015 Adjust font size:

The Bank of Latvia has lowered its GDP growth forecast for 2015 to 2 percent, the central bank said on its analytical website makroekonomika.lv Tuesday.

"Now, in the middle of January 2015, it has become evident that most probably, the geopolitical situation and global economic developments will be slowing Latvia's economic growth even more this year, and it is likely to be 2 percent, falling short of the previously projected 2.7 percent," Bank of Latvia representatives said.

They explained that the provisional forecasts had been revised considering the geopolitical situation, which is not improving and having a very negative impact on the region's economy, including Latvia.

"Russia's economic perspectives have significantly worsened in recent months, and this is having a negative impact on Latvia's export growth," the Bank of Latvia said.

At the same time, there are also upward risks to the Bank of Latvia's latest GDP forecast, as possible positive effects may come from the planned re-launch of Liepajas Metalurgs steel company, and low oil prices may have beneficial effects not only on the Latvian, but also the whole Eurozone's economy.

The Bank of Latvia has also revised its inflation forecast for this year to 0.9 percent from 1.4 percent projected in December.

According to the Bank of Latvia representatives, the current oil price dynamic, as well as slow and unsteady economic growth shown by European countries suggest of significant inflation-reducing factors that are likely to be at work in 2015. Also, Latvia's economic growth prognoses for 2015 do not contain any indications of serious inflation risks for the nearest future.

At the same time, wages are expected to keep rising in Latvia this year, although at a more moderate pace than in 2014, and households are likely to keep saving money amid external volatility. The main domestic factors fuelling inflation in 2015 will be related to the opening of the electricity market for households. Endit