According to the European Commission, Latvia’s economy will grow by 4.2%, while EU average is 1.5% and euro area average is 1.2%.
The forecast remains based on the assumption that the implementation of agreed policy measures at EU and Member State level sustains improvements in confidence as well as financial conditions and advances the necessary economic adjustment in Member States, by increasing their growth potential.
According to the winter economic forecast of the European Commission, GDP growth should regain momentum with recovering exports this year in Estonia.
European Commission said in its European Economic Forecast that the real GDP growth, which slowed to 0.7% in 2013, is expected to regain momentum to reach 2.3% in 2014 and 3.6% in 2015, as external demand recovers.
Estonia’s public debt is expected to remain close to 10% of GDP and only small fiscal deficits are forecast this year and next.
Last year, the unemployment rate fell to 8.8%, down from 10.2% a year earlier. Employment is expected to grow further and unemployment to continue contracting over the forecast horizon, but at a much slower pace in a tightening labour market. Nominal wage growth accelerated to 8.8% in the third quarter of 2013, with real wage growth reaching 5.4%. In 2015, nominal wage growth is expected to stabilise at around 7% and real wage growth at around 4%, reflecting solid output growth, further minimum wage increases by 10% each year and unemployment hovering around its natural rate.
With the impact of earlier global commodity price increases fading out, HICP inflation receded to 3.2% in 2013. The assumed decline in global commodity prices is expected to ensure that inflation will continue its slow decline, just below 2.0% in 2014. However, rising core inflation reflecting strong wage growth and a further excise tax increase on alcohol are set to push inflation back to around 3% in 2015.
The general government balance is forecast to show a small deficit of 0.4% of GDP in 2013. In 2014, the deficit is projected to remain unchanged at 0.4% of GDP. On a no-policy-change basis, an unchanged government balance is projected for 2015.
In structural terms, the fiscal position is forecast to have deteriorated by 0.3 pp. in 2013 and to improve by 0.4 pp. of GDP in 2014; in 2015, on a no-policy-change basis, it is expected to deteriorate by 0.3 pp. of GDP. The debt-to-GDP ratio is expected to remain close to 10% of GDP in 2014-15.
“Recovery is gaining ground in Europe, following the return to growth in the middle of last year. The strengthening of domestic demand this year should help us to achieve more balanced and sustainable growth. Rebalancing of the European economy has been progressing and external competitiveness is improving, particularly in the most vulnerable countries. The worst of the crisis may now be behind us, but this is not an invitation to be complacent, as the recovery is still modest. To make the recovery stronger and create more jobs, we need to stay the course of economic reform,” said Olli Rehn, Commission Vice-President for Economic and Monetary Affairs and the Euro in a statement.
Source: The Baltic Course
http://www.baltic-course.com/eng/analytics/?doc=88251
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