The Latvian government will most likely have to give the slowing economy some fiscal stimulus from April, the prime minister said on Wednesday.
Signs of a slowdown have emerged after several years of double digit growth. Gross domestic product growth in the last quarter of 2007 was below 10%. Retail sales have fallen sharply at the start of 2008. Prime Minister Ivars Godmanis said the government would look at the budget, GDP and other economic statistics in early April. “Then we will have to look at the situation very seriously,” he told commercial television channel LNT. “I think we will need a further a stimulus to the economy from the government side, making state procurement active and speeding up processes connected to European funds,” he said.
Godmanis told Reuters in an interview recently that the government could help prevent a too sharp economic slowdown by bringing forward state procurement plans from the end of the year to the middle of the year. The economies of all three Baltic states are slowing, with northernmost country Estonia showing the sharpest deceleration. Its GDP expanded 4.5% in the last quarter of 2007, the slowest for eight years. However, inflation is on the rise due to global food prices, energy costs and excise duty hikes. Inflation in Latvia in January hit 15.8% year-on-year. (Reuters)