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Ceturtdiena 09.04.2020 | Name days: Valērija, Žubīte
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Economist: global economic growth to be slower-than-forecast

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The Latvian and Baltic economies are continuing to expand; however the prevailing background has grown more negative. Recession is based on global structural problems that have not been fully resolved but only repaired by injecting cash in the economy, says Martins Kazaks, economist at Swedbank.

Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RUHe adds that the uncertainty has heightened over the past months, negatively affecting the global economic growth.

After the recovery from recession, the gross domestic product (GDP) grew briskly, yet it slowed down just as fast in the second quarter of 2011. There are countries with very sluggish growth. Along with problems aggravating also on the financial markets, the second half-year and subsequent years are expected to report slower-than-forecast growth, Kazaks predicts.

In his view, many global economic issues are not being addressed adequately. Politicians are not giving clear answers, while financial markets are starting to panic in a form of great sell-offs. This leaves a negative effect on investments and the overall sentiment. If the U.S. can afford to wait, Europe must no longer hesitate, as the situation in the risk area is much more topical here, the economist points out.

It is expected that starting from the second half of 2011, the quarterly growth rates will worsen, remaining flat in 2012 and 2013. The European Union’s weakest countries are not carrying out extensive structural reforms, political decisions are delayed and not aggressive enough, Kazaks indicates.

He says there are several scenarios for future global economic developments. According to the economist, the base scenario foresees little growth, while the worst scenario – relapsing into another recession, with such countries as China and Brazil boosting growth. The third scenario with the least likelihood is that politicians finally adopt hard decisions and raise sentiment throughout the world.

This still means very unstable financial environment for Latvia. If the global expansion is sluggish, the export demand will be slower as well, which in turn will inevitably affect Latvia’s development pace, Kazaks concludes.


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