RIGA, Latvia - Latvia's Finance Ministry announced on Wednesday that the economy will shrink 12 percent this year, the bleakest forecast yet for the troubled Baltic state.
The revised forecast is considerably worse than the 5 percent decline written into this year’s budget, a number that Latvia’s center-right government had agreed on with the International Monetary Fund late last year while arranging a -7.5 billion bailout loan.
Finance Minister Atis Slakteris said in a statement that the revised number was necessary given the bleaker world economic outlook, which was hurtin Latvia’s potential to export. He added that consumption and investment numbers also needed to be recalculated.
The forecast comes after Latvia’s statistics agencyannounced Feb. 9 that gross domestic product plunged 10.5 percent in the fourth quarter of last year compared to the same period in 2007.
Latvia currently has the worst performing economy in the 27-member European Union.
The ministry also said that unemployment would reach 12.7 percent this year and inflation, currently the highest in the EU at 9.8 percent, would fall to 3.3 percent.
