Swedbank ups Latvia's economic growth forecast for 2015

Swedbank, the largest bank operating in Latvia, has raised the Baltic country's economic growth forecast for this year in its latest Economic Outlook released on Tuesday.

While Latvia's GDP growth forecast for 2015 has been raised to 2.4 percent from 2.1 percent, Latvia's inflation forecast for this year has been revised downwards, from 0.5 percent to 0.3 percent.

Although praising Latvia, Lithuania and Estonia for firmly withstanding the Russian economic recession by diversifying their exports, Swedbank analysts expect Baltic exports to Russia to keep declining at least in the short term.

Over the next couple of years, Latvia's economic growth is likely to pick up thanks to improving foreign demand, which will give more opportunities for export, the Swedish bank said, predicting that the Latvian economy will expand by 3.3 percent in 2016 and by 3 percent in 2017.

Latvia's inflation forecast for 2016 has been cut from 2 percent to 1.5 percent, but in 2017 consumer prices are expected to climb 2.3 percent.

Investments are also projected to increase as EU funding is gradually made available to the Baltic countries. Noting that relatively strong wage growth will be fueling private consumption, Swedbank warned that the wages have been growing faster than productivity which might hurt price competitiveness in the future. Endit