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Economics Ministry: export is Latvian national economy revenue source

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU, Artis Kampars

The Economics Minister Artis Kampars

For the fifth consecutive quarter the Latvian Gross Domestic Product (GDP) is gradually growing. In the fourth quarter of 2010, GDP exceeded the level of the exact quarter last year by 3.6%, informs the Economics Ministry.

The Economics Minister Artis Kampars indicates similarly as Latvian companies were the first to feel the financial crisis start in 2008 and only after a while – the residents, currently the positive economic trends are seen first by companies with real export opportunities, as export plays the key role in the Latvian national economy’s recovery. Successful export expansion is fostered not only by improving situation in foreign markets and growing demand, but also the government’s strategic decisions for business support, particularly in priority sectors, to boost Latvian producers’ competitiveness.

The macroeconomic situation analysis shows export growth rates were considerable in 2010 and starting from the third quarter exports surpass the pre-crisis levels. Exports of goods at current prices rose 30% and the growth is ongoing this year as well – in the first two months of 2011, exports of goods exceeded the indicators of the exact period last year by 43.2%.

The Economics Ministry indicates export expansion is a way to boost national economy revenue and sustainable economic growth. Therefore, the Ministry is currently working on Foreign Direct Investment Attraction Strategy for 2011/15 to create a single, dynamic, cooperation-based investment attraction procedure – POLARIS process. It will bring together the main competent investment attraction participants – state institutions, private sector, municipalities and scientific institutions. The strategy is to identify the prospective Latvian industries for foreign direct investments and target countries with the highest chance of placing investments.

More export possibilities also form the basis of the trade sector’s, particularly manufacturing sector, growth, which was up 15.4% in 2010. Woodworking, metalworking and electrical and optical equipment industries had the largest share in the manufacturing sector expansion. These positive trends also maintained in the first months of 2011.

Moreover, also private consumption is gradually stabilizing mainly due to positive trends in the labour market. In 2010, the number of the employed rose more than 30 thousand with the unemployment rate dropping accordingly. In 2011, the labour market situation is forecast to improve gradually.

Public administration consumption in 2010 kept declining due to the implemented budget consolidation measures. Also, investment activity was very low last year and the recovery is slow – in 2010 there were almost 20% less investments in the Latvian national economy than in 2009.

In 2010, consumer prices spiked 2.5%, mainly due to external factors – global food and energy resources price gains.

The ongoing global price surge and the consumption tax rate increase determined further consumer price growth. In March 2011, the 12-month inflation formed 4.2%. It is expected with surging domestic demand in the second half of 2011 service prices may climb as well. Such price dynamics could boost the overall price level in 2011 by 3.5%, compared to the previous year.

The Economics Ministry points out the Latvian economic trends allow forecasting GDP will keep growing gradually in the coming quarters – in 2011 the overall growth will be positive and the GDP is likely to exceed the 2010 level by 3.5%. Also, export will continue to be the key economic driver in 2011.


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