Latvia's central bank downgrades 2016 GDP growth forecast to 1 pct

The Bank of Latvia has downgraded its forecast for the country's economic growth in 2016 for the fourth time by cutting it to just 1 percent on Friday.

Meanwhile, the central bank's forecast for the Latvian economic growth in 2017 remained unchanged at 3 percent, Bank of Latvia Governor Ilmars Rimsevics told a press conference.

The Latvian central bank chief pointed to stagnation, which in recent years has been recorded in several vital areas: investment activity and export growth have been stalling and lending remained weak.

Absorption of European Union funding, which has not been going as smoothly as one could wish for, has also been hampering growth, Rimsevics said.

"Unfortunately, the economy has increasingly been tending to cool down, and the likelihood of a 3.5 percent GDP growth next year is slight," the Bank of Latvia governor said.

The central bank chief emphasized the need for Latvia's policy makers to move quickly to ensure the stability of the tax system, warning that otherwise Latvia can lose in competition with its neighbors and end up in stagnation.

The Bank of Latvia had previously lowered its original 2.7 percent economic growth forecast for 2016 to 2.3 percent in March, to 2.3 percent in the summer, and to 1.4 percent in September. Endit