Latvia’s economy will expand at a faster pace after the Baltic nation adopts the euro as higher exports stoke incomes, a central bank official said.
The currency will boost investment and trade, according to Uldis Rutkaste, deputy head of monetary policy at the bank. Credit ratings will also improve, saving about 900 million euros ($1.1 billion) in borrowing costs over the next decade, he said today in an interview with Latvijas Radio.
“The euro maybe won’t make everyone rich overnight,” Rutkaste said. “But in the next few years after its introduction, people will feel it in their wallets.”
Latvia got a 7.5 billion-euro bailout in 2008 after its second-biggest bank needed rescuing, credit markets froze and a property bubble burst. Gross domestic product, which plunged more than 20 percent in 2008 and 2009, has risen for two years and advanced 5.1 percent from a year earlier in the second quarter, outpacing the rest of the 27-member European Union.
Latvia is rated at the lowest investment grade by the three major ratings companies, equal to Azerbaijan, Croatia and Iceland. The yield on the government’s dollar bond due 2021 fell 2 basis points today to a record-low 3.8432 percent as of 12:04 p.m. in the capital, Riga, data compiled by Bloomberg show.
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