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LATVIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 9,671 8,406 7,500 94
         
GNI per capita
 US $ 4,070 3,480 3,230 79
Ranking is given out of 208 nations - (data from the World Bank)

Books on Latvia

REPUBLICAN REFERENCE

Area (sq.km) 
64,589

Population
2,306,306

Principal 
ethnic groups 
Latvians 52.0%
Russians 34%
Belarusians 4.5%

Capital 
Riga

Currency 
Lats

President
Mrs Vaira 
Vike-Freiberga




Update No: 303 - (27/03/06)

More than a ceremonial post
The death of Lennart Meri, former president of neighbouring Estonia, in March is a reminder that being president of a Baltic state is a job unlike any ceremonial presidency in the West. Meri embodied his nation and the world saw him as its greatest representative, as with Havel in the Czech Republic.
The President of Latvia, Vaira Vike-Freiberga, did not have the long record of resistance to communism that Meri and Havel did. She lived in the US throughout the Cold War, only returning to her homeland after independence in 1991. 
She was elected in 1999 as a non-party candidate in the second round. She has since become the embodiment of her country as a whole and of its aspirations to join the West, which under her presidency it has definitively done, now a member of both NATO and the EU.

Above the fray
She has handled tricky situations with aplomb, as in March when police in the Latvian capital of Riga stopped the unsanctioned demonstration of SS veterans. About 300 people took part in the march. This has previously been a massive provocation - and intended as such - against the large Russian ethnic minority in the country, and the capital. It has also, in previous years, been cause for scandal in western Europe in those nations that fought against the Nazis in WWII
A group of antifascists attempted to stop the march. Some of them were detained.
On March 13, Riga parliament declined the request to hold the veterans' march, as well as protests against the former Nazi collaborators, but nationalists and radicals announced they would go ahead with the event despite official notices. 
Vike-Freiberga had earlier slammed the planned marches saying the country "has set a special date, November 11, for commemorating soldiers, whereas March 16 is a kind of holiday that we really do not need." 
Last year, 20 people were arrested in Latvia during clashes between nationalists and leftist protesters on March 16.

The new Latvian woman
One of the exciting things about the newly emergent Baltic states is that they are prepared to try out new ideas. Estonia has its flat tax. Latvia has its feisty women in politics. 
Former Foreign Minister and independence activist Sandra Kalniete joined the New Era political party January 30th, where party colleagues greeted her with calls to succeed Vike-Freiberga when her term expires next year. 
It is generally agreed on all sides that Vike-Freiberga has been an outstanding success. Her second term expires in mid-2007. She has been named among the leading candidates for the post of UN secretary-general, which will become vacant after present Kofi Annan steps down at the end of this year.
The decision to join New Era, Parliament's largest political party, came after months of periodic speculation in the media whether Kalniete would put an end to her independent status and join a political party. It was widely believed that she would only join a political party if she could not find a position in the country's diplomatic corps.
Kalniete has not revealed whether she would agree to be the party's candidate for head of state. However, she admitted to journalists that it would be very difficult to follow such a powerful personality as Vaira Vike-Freiberga. 
"Kalniete would make a splendid presidential candidate, but this question isn't yet on the agenda," New Era secretary Edgars Jaunups told the daily Diena. 

Latvia has bang-up year in 2005
Latvia exceeded itself last year in terms of economic expansion, as GDP grew 10.2 per cent, the highest level since the country gained independence. In the fourth quarter alone, the economy expanded 10.5 per cent, according to the Latvian Statistics Bureau. 
The stellar growth was fostered by a 17.4 per cent increase in trade, 16.2 per cent in the transport and communications industry, 15.5 per cent in construction and 6.3 per cent in manufacturing.
Trade accounted for approximately one-third (3.8 per cent) of the overall GDP growth. It now accounts for almost one-fifth of GDP, while transport and communications almost 16 per cent.
"I think it will be no surprise to anybody that trade is the fastest growing among Latvia's key industries," said Zigurds Vaikulis, head of market analysis at Parex Asset Management.
"Both industry and trade showed growth in the fourth quarter of 2005, and the development of other branches of the economy has also been rapid," said Liene Kule, a senior analyst at Hansabanka. She added that trade and construction would remain Latvia's key industries in the future, as their growth is ensured by domestic demand. 
Glancing across the Baltics, Estonians also had reason to cheer. GDP there grew 10.5 per cent in the fourth quarter of 2005, putting it on par with Latvia. During the previous three quarters of the year, Latvia had the hottest economy. 
Lithuania saw its economy grow 8.8 per cent last year. 
In Latvia, GDP per capita in 2005 was 3,046 lats (4,334 euros) in constant prices, which is 10.8 per cent, or 297 lats, more than in 2004, according to bureau statistics. 

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Meanwhile, the statistics office announced on March 8 that consumer prices rose 0.4 per cent this February month-on-month, while annual inflation slowed to 6.9 per cent. Prices were influenced mainly by fluctuations in vegetable, alcohol and clothing prices, bureau experts said.
In February, prices of goods rose by 0.4 per cent, while those of services increased 0.3 per cent. On a year-on-year basis, prices of goods increased 6.9 per cent year-on-year and of services 6.8 per cent.
Hansabanka's Kule commented on the inflation data by saying, "These results are not sufficient to speak about full price stability as prices kept growing in large enough number of areas." 
SEB Unibanka analyst Andris Vilks echoed the sentiment, saying there was little cause for celebration. "The same factors that were, and will be here, won't permit inflation to come down seriously in the coming months. Those are first of all food prices, housing costs, health care, education, restaurant and hotel services," he said. 
Nevertheless, the balance-sheet on economic performance is highly positive. Austere financial economists, such as Vilks, may be worried about inflation. But those finding new jobs or their pay packets soaring cannot forbear to cheer. 

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EURO ADOPTION

Riga approves plan for adopting Euro in 2008 


The Latvian government recently approved a national strategy for adopting the Euro on January 1, 2008 despite worries that the plan might be jeopardised by high inflation. "The plan should be introduced whether we adopt the Euro on January 1, 2008, or not, New Europe reported.
"For the time being the date set by the government has not been changed," Latvian Finance Minister, Oskars Spurdzins, said. Latvia's ambitions to switch to the single currency in 2008 are threatened by an inflation rate last year of seven per cent, the highest in the 25-member European Union. The national plan said the Euro should be introduced "in a way that would affect the daily life of Latvian residents as little as possible." The government aims to introduce the Euro in cash and clearing transactions simultaneously. But cash payments in both Euro and the national currency, the lat, would be possible for a month after the single currency is adopted. Latvians would also be able to exchange lats for Euro without commission for six months after Eurozone entry in commercial banks, the country's postal company and other commercial institutions that have a licence for selling and buying foreign currencies. And retailers would have to display prices in lats and Euro three months before and one year after the switch to the Euro. Latvian year-on-year inflation was seven per cent in 2005, according to the Baltic country's central statistics bureau. Seasonally adjusted inflation, which is important for Euro adoption, was 6.67 per cent. The Latvian central bank has forecast that inflation in 2006 would be between 5.5-six per cent. Under the EU's Maastricht criteria, inflation should not be more than 1.5 per cent higher than the average of the three lowest rates in the Eurozone.

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EUROBONDS

Parex Banka plans Eurobond issue in 2006 

Latvia's Parex Bank recently unveiled plans to issue five-year Eurobonds in 2006. Viktors Zakis, the bank's CEO, made the formal announcement. Parex Banka selected Deutsche Bank and HSBC at a meeting as the organisers of the Eurobond issue, according to the CEO, New Europe reported.
"The issue is planned for the second quarter and there will be a road show before that in Europe and Asia," Zakis said. The volume of the planned issue was kept undisclosed, however "it will be much more than the previous issue," asserted the CEO. Parex Banka "is planning to strengthen its business relations with international investors from Europe and Asia" with the new Eurobond issue, a bank release cited Yevgenia Zolotareva, an executive at Parex Banka, as saying.

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FOREIGN COOPERATION

Japan, Latvia to cooperate on UNSC reforms

Japan foreign Minister, Taro Aso, agreed with his Latvian counterpart, Artis Pabrikls, recently at a meeting in Tokyo to cooperate on United Nations (UN) reforms and other issues and spoke about Japan's new plan for reforming the UN Security Council (UNSC), the Japanese Foreign Ministry said, reported by Japan Economic Newswire, New Europe reported.
Latvia, along with Germany, India and Brazil co-sponsored Japan's resolution to reform the UNSC last year. Since then, Japan has come up with a new plan. Meanwhile, Pabriks told Aso that Latvian Prime Minister, Aigars Kalvitis, is planning to visit Japan in the spring for the opening of the Latvian Embassy in Tokyo, Japan Economic Newswire reported. Aso said he will welcome the visit, the ministry officials said.

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