IMF Staff Country Reports

Republic of Latvia: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Latvia

September 15, 2023

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International Monetary Fund. European Dept. "Republic of Latvia: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Latvia", IMF Staff Country Reports 2023, 330 (2023), accessed November 21, 2024, https://0-doi-org.library.svsu.edu/10.5089/9798400255212.002

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Summary

The 2023 Article IV Consultation highlights that Latvia is facing an inflation shock, slow growth, and geopolitical challenges. The government will have to continue to deal with the spillovers in the Baltic region from the Russian invasion of Ukraine and the impact of sanctions imposed on Russia and Belarus, the cost-of-living crisis, and energy security. These short-term concerns are adding to the long-term policy challenge of sustaining the income convergence process. Latvia’s income convergence has already been lagging the other Baltic countries. Amid high uncertainty, the balance of risks is tilted to the downside. The main risks stem from an escalation of the war and associated sanctions, which could result in renewed increases in energy prices, energy supply disruptions in Europe, and weaker external demand. Global financial conditions could further tighten, with spillovers to Latvian banks and domestic credit growth. The paper recommends that structural policies should facilitate the green transition, reduce skill shortages, and boost productivity.

Subject: Energy prices, Fiscal policy, Fiscal stance, Inflation, International organization, Monetary policy, Prices, Public debt

Keywords: Baltics, Bank credit risk indicator, Energy prices, Europe, Fiscal stance, Government finance statistics yearbook, Income convergence, Inflation, Inflation momentum, Inflation shock, Shock support measure

Publication Details

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