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The trend of the Latvian economy shows encouraging signs of recovery, which suggest that Latvia has already overcome the worst of its recession closely connected to the world economic crisis.
As a matter of fact, some sectors are already experiencing a growth phase, despite the presence of other sectors which are still in decline or stagnant.
GDP. After the decreasing of GDP over the past two years (-18% in 2008 and -3.9% in 2009) caused by a remarkable fall in the domestic demand and by a contraction of gross fixed capital investments, in 2010 GDP turned positive. In the last quarter of 2010, GDP increased by 3.7% in comparison with the 4th quarter of 2009. Furthermore, GDP in the 4th quarter of 2010 rose by 1.1% compared to the previous quarter.
Inflation. In December 2010 the inflation rate was of 2.5%, compared to the same period of the previous year. In January 2011, instead, inflation reached 3.7%, mainly due to the increase of VAT from January 1st, 2011.
Industrial production. The industrial production began growing again thanks to the rise in exports, which is due to a regained competitiveness in the manufacturing industry and to an external demand improvement.
Unemployment. The level of unemployment in the 3rd quarter of 2010 was 18.2%, which represents a slight betterment compared to the beginning of the year (20.7%). Despite of this, Latvia still remains one of the EU countries with the highest rate of unemployment. Until 2008, this problem could be defined structural, as the most part of the population, especially adult people, graduated during the Soviet period and the education they received was no longer competitive and adequate to match the modern market requirements. Over the last three years, instead, unemployment also afflicts the rising generations. The majority of unemployed in Latvia have been in this condition for more than two years and unemployment is distributed in a heterogeneous way. The lowest unemployment rate is registered in Riga, while the highest one concerns the rural areas, where job opportunities are very few.
Purchase power. The purchase power of resident population is constantly diminishing, due to the very restricted access to credit and to cuts in both public and privates salaries. The Government aims to reach in the next years the 50% of the EU average level of salaries, by decreasing remarkably taxes for the entrepreneurial sector. Gross monthly salary in the 3rd quarter of 2010 was approximately 637 Euro. Currently, the purchase power distribution constitutes a huge problem in Latvia: while part of the population has already regained its level of well-being, another relevant part still lives with the minimum means of subsistence.
