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Ilmars Rimsevics: we should be prepared to face another crisis

Ilmars Rimsevics/flickr.com/Bank of Latvia.
Although Latvia’s GDP is growing, the growth rate is gradually becoming slower. Latvia should be prepared to face a new crisis, said Ilmars Rimsevics, governor of the Bank of Latvia, in an interview to Rīta Panorāma.

According to him, Latvia’s economic growth is slowly becoming slower, as is Eurozone’s economy as a whole. This year’s inflation in Latvia is not expected to be 2%. It will likely be close to zero, as reported by lsm.lv.

The Bank of Latvia currently works on the review of Latvia’s inflation outlook. The bank may publish its estimates in spring. It is also necessary to review the state GDP growth outlook, which is also expected to be lower than the current estimate, as confirmed by the governor of the Bank of Latvia.

«Even Latvia’s economy is unfortunately starting to cool down. We should expect the worst. We should learn from the previous crisis. Eight years have passed, many things have been forgotten. But everything starts very innocently – we currently live with a slight deficit. We’ve all seen what happened when the crisis began. Everything can change in a matter of a couple of months. We have to be prepared,» – said Rimsevics.

On Thursday, 10 March, the European Central Bank announced new economy-stimulating measures.

The money ECB lends to commercial banks has become even cheaper – ECB will provide loans with 0% interest rate. «We have never seen something like this before,» – said Rimsevics. He nevertheless hopes the announced measures will help stimulate economic growth in Eurozone.

Rimsevics notes that central banks in Europe have been printing money for years in hopes of saving member states from stagnation. Printed money alone is not enough, however.

According to the head of the Bank of Latvia, Eurozone no longer has any good medicine left to stimulate economies of its member states. «It is clear that national economies continue cooling down. ECB cannot possibly pull member states from stagnation and crises by simply printing money and increasing the volume of money in circulation,» – said Rimsevics.

This is why Latvia has to think more about increasing its competitiveness, enhancing the effectiveness of state administration and reviewing ineffective use of resources.

The government and commercial banks should sit down behind one table as soon as possible, said Rimsevics.

Latvian Finance Ministry had previously estimated the country’s GDP will be 3% and inflation will be 2% in 2016. Based on these predictions, the country’s budget deficit for 2016 is expected at 1% of GDP. 

BNN
13-03-2016
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