IMF: Latvia's GDP to contract 3.5% in 2010, grow 3.5% in 2011
23.07.2010, 13:00Latvia’s economy will contract 3.5 percent this year, before growing by the same amount next year, according to the International Monetary Fund.
The IMF previously estimated the economy would shrink 4 percent this year. The unemployment rate is expected to rise to 21 percent before falling in 2011.
Consumer prices are expected to decline 2 percent this year, a slower decline than the previous forecast due to higher energy and import prices.
The IMF agreed to transfer about $135.6 million to Latvia after completing the country’s third review as part of its contribution to the 7.5 billion-euro loan. The European Commission, which is financing the largest share of the loan, agreed on July 20 to release 200 million euros.
Unit labor costs in manufacturing have fallen 21 percent since the end of 2008, when Latvia turned to a group led by the IMF and the European Union for a 7.5 billion-euro loan after its second-biggest bank failed. Latvia’s program calls for keeping its exchange rate fixed to the euro while letting wages and prices fall to restore competitiveness.