Monday, August 10, 2009

"Good" News From Latvia

GDP fell "only" 19.6% in the second quarter 2009 from same quarter the previos year. That this was interpreted as good news says a lot about how deep the economic slump in Latvia and the other Baltic countries has been.

Still, the fact that the drop in output is slowing, while the previous imbalances in the form of high inflation and large external deficits have turned into dramatic disinflation and external surpluses, means that the worst may be over for Latvia. And that Latvia and the other Baltic countries, Estonia and Lithuania, will probably be able to avoid devaluation.


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