Latvian c. bank cuts GDP growth forecast, inflation forecasts for 2016

The Bank of Latvia on Monday cut GDP forecast for this year to 2.3 percent from the previous 2.7 percent and lowered inflation prognosis to 0 percent from 1.3 percent.

Latvia's economic growth forecast for 2016 has been revised, taking into account geopolitical tensions, worsening global growth forecasts and weak investment dynamic, the central bank said.

Inflation is expected to remain low throughout the year, the Bank of Latvia said, projecting consumer prices to remain flat in 2016.

Although the central bank still expects the Latvian economy to grow this year, the growth rate will be slowing down, with wage growth, too, likely to be weaker than in previous years. This means that demand and its pressure on inflation are not going to increase in the near future.

Bank of Latvia governor Ilmars Rimsevics said in an interview with public television interview earlier that the Latvian economy, just like the economy of the whole eurozone, was cooling down.

"The economy is clearly cooling down, and the European Central Bank alone cannot lead eurozone countries out of crises and stagnation just by printing more money and increasing the amount of money in circulation," the Bank of Latvia governor said.

Latvia has to concentrate on boosting competitiveness, streamlining public administration, revising expenditure and using it more efficiently, the Bank of Latvia government believes. Furthermore, the government and commercial banks should sit down at the negotiations table to discuss the reasons for the banks' reluctance to lend, Rimsevics said.

Latvia's 2016 budget is based on the Finance Ministry's forecast, according to which the Baltic country's GDP is supposed to expand by 3 percent and inflation to reach 2 percent this year. Endit