Nordea Bank AB (NDA) more than doubled its forecast for Latvia’s economic growth this year to 4.2 percent from 2 percent estimated in June, citing strong exports and fixed investments.
Still, growth will slow in the second half due to the effects of the euro area’s debt crisis, the largest Nordic lender said in its economic outlook today. Economic output will decelerate to 2.5 percent next year, down from the bank’s June forecast of 5 percent.
Latvia’s rolling 12-month inflation is still “slightly” above the 3 percent level, about the reference rate which the country needs to meet next spring to qualify for euro adoption in 2014, Nordea said. A potential increase in food prices “would have a significant impact on inflation in Latvia as the weight of food in the consumption basket is among the highest in the EU,” it added.
The bank also slightly raised its GDP forecast for Latvia’s northern neighbor Estonia this year to 2.3 percent. It cut both Estonia’s and Lithuania’s growth outlook for next year, to 3.5 percent and 3.3 percent, respectively.
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