Riga - The economic gloom afflicting the Baltic states got
several shades darker Tuesday with a fresh forecasts revising
expectations downwards.
Until mid-2007 the so-called 'Baltic Tigers' of Estonia, Lithuania
and Latvia recorded Europe's fastest growth rates, but their
economies have stalled spectacularly in the wake of the global
downturn.
According to a spring forecast from the Estonian Ministry of
Finance, the economy in the smallest of the Baltic states will
contract by 8.5 percent in 2009.
'Estonia is undoubtedly at a difficult time. At the same time this
gives us a real opportunity to use the downturn to create a more
efficient and more stable economy,' said Estonian Finance Minister
Ivari Padar.
An even bigger hit is likely to be suffered by neighbouring
Latvia, according to Economics Ministry official Olegs Baranovs.
Briefing the cabinet of Prime Minister Valdis Dombrovskis,
Baranovs said Latvian GDP would probably contract by more than the
official 12 per cent forecast, reported the Baltic News Service.
According to a fresh report produced by the Economics and Finance
ministries, Latvia's unemployment rate could hit 16 per cent by the
end of the year.
'It is possible that, as a result of the global financial crisis,
the decline in external demand will be much steeper than currently
estimated ... Further dramatic cuts in lending and public expenditure
would result in a sharp decline in investment and private
consumption,' the report said.
The new figures will add weight to Latvia's current attempts to
renegotiate the terms of a 10-billion-dollar economic assistance
package brokered by the International Monetary Fund.
According to the current agreement, Latvia's budget deficit must
not exceed 5 per cent of GDP, but Prime Minister Dombrovskis is
arguing that the worsening economic outlook makes such a target
impossible and is asking for a 7 per cent cap instead.
On Monday, Lithuanian Finance Minister Algirdas Semeta revealed he
expects a 10.5 per cent contraction in the largest of the Baltic
economies this year.
'The bigger-than-predicted GDP decline will inevitably affect
budget revenues,' Semeta said. 'So the government in completing the
preparation of budget amendments designed to significantly reduce
costs while ensuring the country's macroeconomic stability.'
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