Expected decline in Latvian GDP: scenarios
Latvia’s economy has shown stable, albeit small growth over a long period of time. However, the coronavirus epidemic was an unexpected factor that made absolutely all countries feel the crisis phenomena, and the Baltic States were no exception. Latvia’s GDP is decreasing, and the scale of the dynamics is not fully known. The decisive role in this case is given to how quickly and with what losses the state can neutralize COVID-19.
In Latvia, as in the rest of the world, business activity has been suspended, companies are closing down, and jobs are being cut. Experts say that they were wrong about the original forecast, and the real situation is much more serious. The global economy is in recession, and it will not bypass Latvia. It is not yet clear how quickly the world will be able to recover and whether the measures introduced to support the market will be effective.
Obviously, the country’s GDP will decline. In the second half of the year there will be a sharp decline in economic processes, but by the end of the period a small increase can be expected, although it will not save the total annual statistics, which will be negative.
Experts are optimistically inclined to 2021. After the difficult current year, a rapid growth is expected, which to a small extent will cover the decline. The main question remains how quickly the epidemic will be neutralized. Only after that can any steps be taken to assess losses and recover the economy. It is extremely difficult for business, it is necessary to prepare for the fact that many companies will close down, the rest will cut costs and possibly retrain. The longer the economy is simple, the harder and longer the country will have to recover.
The biggest crisis is now in the tourism and air transport sectors. airBaltic has to downsize over 40 employees and many projects have been frozen. The activities of other segments are hampered by the transport industry, which is not able to withstand the entire supply load, which has increased several times. Besides, it is difficult for business representatives to repay debts to banks, because assets are limited.
The recession is inevitable; one can only hope that it will not be so serious. With a positive outcome, the recession will be at 3%, but it is worth preparing for a worse result.
Some experts point out that GDP is not the main factor. It is now important to focus on keeping jobs, otherwise we may face a large increase in unemployment, which will be another blow to the economy.
The epidemic has also given a positive impulse – the healthcare sector is recovering, the demand for IT-segment has grown. As imports from China have declined significantly, local light industry is also gaining momentum.