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After a brief period of independence between the two World Wars, Latvia was annexed by the USSR in 1940. It reestablished its independence in 1991 following the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian minority (some 30% of the population) remains of concern to Moscow. Latvia continues to revamp its economy for eventual integration into various Western European political and economic institutions.
Update No: 264 - (01/01/03)
Misgivings about the EU
The Latvians are not so much in rhapsody at the imminent prospect of EU entry as existing members might suppose. In this they are like the Estonians and certain Central Europeans. They are being expected to conform to a state-directed version of economic life, albeit one based on market capitalism, not communism. But to Latvian susceptibilities the dictates of Brussels sometimes disturbingly echo the decrees of Moscow in the days of command-administration economies.
The Latvians are a Protestant people after all, who abhor above everything, outside dictation yet have known little else. Hence it is not so surprising that only 45% of the population polled recently favour entry into the EU, particularly of the NATO membership goal has already been achieved.
Brussels backs down a bit
Aware of these facts and of the disastrous impact which a 'no' vote in Latvia in a referendum on the EU would have, both inside and outside the country, Brussels has been backing down on its most intransigent demands. Latvians will be able to continue to fish undersize herrings, even though European stocks are virtually exhausted. Meanwhile, local hunters will be able to go on shooting up to 50 lynx per year, an endangered species. Brussels is, indeed, more ecologically conscious than the intrepid fishing folk and outdoors sportsmen of Latvia, and also in this instance more tractable.
Latvian agriculture is likely to prove a burden on the CAP eventually, but Brussels is trying to minimise this by withholding full quotas and subsidies for some years. The population dependent on the agricultural sector is 15% of its total population, but capable of producing less than 5% of GDP. The small farmers form the backbone of opposition to EU entry, when their ranks are likely to dwindle radically. Having regained possession of their land only recently, they no more like fierce EU directors to cull their numbers than they did fierce commissars of old who collectivised them in the first place.
Growth and inflation prospects look good
Latvia is forecasting GDP growth of over 5% per annum in coming years. Its finance ministry postulates an increase of 5.5% in 2003; and an average 5.7% in the 2004-07 period. Growth in GDP in 2002 is expected to be 5%.
Consumer prices are due to grow by only 3% per annum in coming years, making the country eligible for Euroland membership soon after EU entry in May 2004 Unemployment should fall to 7.7% of the work force in 2003 and gradually further thereafter.
Latvian government's economy drive earmarks ministerial spending cuts
Following Prime Minister Einars Repse's recommendations to not only cut expenditure but also close institutions and withdraw some specific functions in order to reduce the budget deficit, the government may abolish the National Guard Service, which guards foreign embassies and several ministries, the National Information Network Agency (VITA), the Commission to Investigate the Crimes of the Totalitarian Regimes, and withdraw finance for the Latvian Gypsies' Association, Diena web site has reported.
These proposals were announced at a session of the Cabinet of Ministers to discuss next year's budget, which, however, ended without any specific decisions. Unable to agree on the amount of cuts needed to reduce expenditure, the government once again deferred the issue to next 9th December, when an extraordinary session is planned. The ministers also took a decision on the creation of the Ministry of Health and the Ministry of Regional Development and Local Government Affairs, but the functions associated with state administration were put directly under the prime minister.
Computer technology association expects market growth
Latvia's computer technology association expects the corporate computer market to grow 10-13 per cent in 2003 in Latvia while for personal computer market the growth could be 20-30 per cent, BNS News Agency quoted the association chief executive, Dzintars Zarins, as saying. He noted that the total capacity of Latvia's computer market at present is some 3500-4000 new computers a month.
Zarins said it is possible to predict growth trends on Latvia's computer market only until accession of the country to the European Union and NATO because after that point a lot will depend on the need for Latvia to adapt to the EU market and NATO structures.
For that reason a rapid growth is expected on the corporate computer sector which, Zarins said, though it will last for just a few years, until Latvia satisfies its needs appropriately for the EU and NATO member.
He said that today the computer companies are specialising in specific market segments, for example, Micro-Link, operating in the entire Baltics, has elected to work only with corporate clients while Elkor is dealing solely with the home computer market.
The corporate client segment is developing a trend with companies aiming at business management solutions conforming to e-commerce requirements, with business entities demanding not just computers but also secure network infrastructure plus qualified service plus software solutions for business management.
The clients are ever more preferring solutions offered by firms conforming to ISO quality requirements.
The home computer market meanwhile is developing the so called "box moving" trend with computers and standard software sold in electronics shops with one to three years guarantee term for the computers but no other additional services.
Growth on the home computer market is fuelled by growing activity on the used computer market.
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