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August 11, 2009

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Latvian economy plunges 19.6% in Q2

LATVIA'S economy shed nearly one-fifth of its value in the second quarter compared with the same period last year, official data showed yesterday, signaling a deepening of the Baltic state's recession.

Gross domestic product fell 19.6 percent year on year in the April to June period, the national statistics agency announced, led by a 28 percent slump in retail and a 19 percent drop in industrial production. The restaurant and hotel sector plunged 35 percent year on year.

The fall is the sharpest since Latvia began keeping records in 1996.

Latvia's economy is undergoing a major correction after years of impressive growth after joining the European Union in 2004. The global economic recession has compounded its woes, as Latvia has seen demand for its exports weaken sharply.

Prime Minister Valdis Dombrovskis said the data shows "signs of stabilization" for the economy since the fall hadn't turned out to be as steep as many analysts had predicted.

He suggested that Latvia's economy has hit the bottom and is set to improve. "In the next quarters the situation will become more positive," Dombrovskis said.

Latvians, however, are bracing for one of the most difficult winters on record. Unemployment continues to grow briskly, and last week Welfare Minister Uldis Augulis said the number of unemployed would reach 200,000 by the end of the year - 50 percent higher than the current 135,000 jobless in the country of 2.3 million people.

Latvia has the second-highest unemployment in the European Union after Spain, according to Eurostat.

Still, Latvians can take heart that their economy is no longer the worst in the 27-member EU. Last week neighboring Lithuania announced that its economic output declined 22.4 percent in the second quarter on year.

However, consumer prices continue to fall in Latvia.


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