NewsCase StudiesEvents

Latvian Economy Update

Also in the news...

Expand your international business to make it faster, bigger, and better

This essential hands-on book will show you how to successfully navigate the region's most attractive markets: the UAE, Saudi Arabia, Qatar, Bahrain, Kuwait, and Oman.

Are The New Import Embargos Of Big Importance?

Yes, they are. On August 6 and 7, Russia reacted to the sectorial EU-sanctions with an embargo on the import of food and agricultural products from the EU, USA, Norway, Canada and Australia.

195 Countries - Where to Go First? Introducing Winning Globally Chapter 2

In July, we released the first chapter of Winning Globally

Opportunities for UK oil and gas companies in Africa

UKTIís event in Glasgow during the Commonwealth Games highlighted support available to help UK business access export opportunities in east and west Africa.

Notice to Exporters

Russia added to prohibited destinations for certain licences

Latvian Economy Update

Back to News

Another victim of greedy bankers, foolish decisions and a huge slice of bad luck, the financial future doesn't look bright for poor old Latvia.

TOM TAINTON discusses the dwindling economy.

In Latvia, economic turmoil isn't just shaking the nation's banking system, now the impact of the credit crunch has helped to overhaul the government. In typically unstable Baltic fashion, thousands protested in the cobbled streets of Riga, voicing their displeasure at the country's financial policy. The aftermath resulted in more than 100 arrests and nearly 50 injuries. But the damage was done. The Prime Minister Ivars Godmanis and his right-wing government resigned from office, tails tucked sheepishly between their legs.

In December 2008, Godmanis was forced to seek 7.5bn euros from the European Union, World Bank, and IMF to bail out the banking industry. As part of the deal he had to cut public spending and increase taxes - the sort of policies that won't get you on anybody's Christmas card list.

So what has happened to Latvia? Just two years ago, the nation's economy, thriving from its relatively new-found independence, was growing by 12%. Today the economy is in deep recession, and the only figure growing is that of unemployment - expected to rise by a staggering 40% in 2009. To make matters worse Latvia's gross domestic product (GDP) plummeted 10.5% in the last quarter of 2008, compared with the same period a year previously. Experts are predicting the outlook will only get gloomier, with GDP shrinking again this year.

It doesn't make easy reading for the Latvian government, who face a struggle rebuilding confidence with the country's 2.4 million people. But, as is the common theme in the financial crisis, the blame can be placed firmly on the heads of Latvia's banking superiors. One major reason for the decline was some shady deals made by locally-owned banks, institutions which make up nearly half of the Latvian financial system.

The bankers snaffled deposits from abroad and invested them in the booming property market. When the property market began to decline (surprise, surprise), foreign credit dried up and confidence in Latvian banks evaporated quicker than you can say ¬ĎNorthern Rock'. As customers panicked, rushing to scoop up their deposits, the second largest bank, Parex, collapsed and has since has been largely nationalised.

Another victim of greedy bankers, foolish decisions and a huge slice of bad luck, the financial future doesn't look bright for poor old Latvia.

¬

You are not logged in!

Please login or register to ask our experts a question.

Login now or register.