The severity of Latvia’s economic depression and the government’s deflationist policies have never been in doubt. However, the success of the internal devaluation process remains questionable. The adjustment process was meant to lower domestic prices, particularly wages, in order to restore the international competitiveness of the economy and stimulate exports. According to the latest data,… [Read more]
The three Baltic economies of Estonia, Lithuania and Latvia have been the biggest losers of the 2008-2009 global financial crisis, contracting by 14.1%, 14.8% and a whopping 18.0% in 2009 respectively. After overheating in the preceding three years (Latvia grew on average 10.9% between 2005 and 2007), tightening global credit conditions towards the tail-end of… [Read more]
Few countries have been as badly hit by the global downturn as Latvia. According to a flash estimate released by the statistical office, the Latvian economy plunged by 18.4% y-o-y during the third quarter, which although below the consensus contraction of 19-20%, was nonetheless a horrific rate of decline. Indeed, this would mark the third… [Read more]
As the Latvian government proposes a bill to change mortgage regulation to ease the debt burden on households, Bruce Jeffery argues that the country may be one step closer to eventual devaluation of the currency peg.
Having recently returned from a week-long holiday in the Latvian Baltic sea resort of Jurmala, I felt the stark contrast between a wonderful summer holiday destination and the signs of an epic economic crisis. On the one hand I was impressed at the hospitality and pleasantness of this tiny Baltic Sea town, 20km from the… [Read more]
The sharp spike in Latvian interbank lending rates and the sovereign’s credit default protection premium gave a taste of what awaits the country in case of a devaluation, after key economic advisors to the authorities contemplated such a scenario. Justin Patrie discusses the immediate economic implications of a Latvian currency devaluation and what the impact… [Read more]
For several months now, I have run with the view for a devaluation of the Baltic and Bulgarian currencies. The core scenario has always been that such a move would likely not take place until end-2009/early 2010, but today we got a taste of just how acute the risks are of a much quicker and… [Read more]
