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Monday 19.02.2018 | Name days: Zane, Zuzanna
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Financial Times commentators rigorously discuss Latvia's economy

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Аuthor: PantherMedia/SCANPIXA series of British Financial Times articles have turned into a discussion between experts and commentators about Latvia’s economy and its crisis overcoming model.

The newspaper’s main economic matters commentator Martin Wolf doubts the effectiveness of the austerity measures in his “Why the Baltic state are no model” article. According to him, the economic growth of Baltic states has not recovered. He also doubts the effectiveness of using such a model in other European countries.

In his voluminous commentary, he compares pre-crisis, crisis and current macroeconomic indexes, saying that Lithuania’s, Estonia’s and Latvia’s economic indexes have not recovered from the crisis.

“In the fourth quarter of 2012, Latvian GDP was still 12 per cent below its pre-crisis peak. This is worse than in Ireland, Italy, Portugal and Spain. The other two Baltic states have done better, though also after huge slumps”, – Wolf writes in his article.

“In the fourth quarter of 2012, Latvian GDP was 41 per cent below where it would have been if the 2000-7 trend had continued”, – he adds.

According to Wolf, low workforce expenses and the fact that those are small and open economies means that this kind of model cannot be applied to other countries.

Wolf’s article caused a stormy discussion with countless commentators saying that the 2006 – 2007 crediting and real estate bubble caused GDP increase cannot be considered normal economic growth to be taken as standard.

Executive director of Renaissance Capital Charles Robertson also posted a reply to Wolf’s article. He notes that the comparison of current macroeconomic data with those of pre-crisis period in not a correct method to employ in this situation.

Analysts believe that the quality of life of Latvian residents has increased significantly in comparison to 2000. Latvia’s GDP per capita increased by 85% in the period between 2000 and 2012. Latvian residents ($13 900) are doing much better than Hungarians ($12 700) or Polish ($12 500) with respect to current prices. However their GDP per capita was $3 265 in 2000, which was more than 25% less than Hungary and Poland.

Meanwhile Italy’s GDP per capita has reduced by 5% since 2000. That of Portugal – by 1%, Greece had an increase of 3%, Spain – by 6%. Residents of these countries have not experienced any real GDP increase per capita, and the situation is deteriorating, Robertson writes.

Ref: 102.109.109.7160


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  1. JPR says:

    Have cash for a rainy day!

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