20210901-IMF-Republic_of_Latvia_2021_Article_IV_Consultation-Press_Release_Staff_Report_and_Statement_by_the_Executive_Director_for_the_Republic_of_Latvia_70页_1mb

报告摘要

2021 Article IV Consultation with the Republic of Latvia: Summary

Core Content

The IMF Executive Board concluded the 2021 Article IV consultation with the Republic of Latvia on August 27, 2021, following discussions with Latvian officials from June 1 to 14, 2021. The consultation focused on economic developments, policy responses, and the outlook for recovery after the impact of the COVID-19 pandemic.

Main Points

Economic Impact of the Pandemic

Latvia experienced a relatively mild recession, contracting by 3.6% in 2020, compared to an average of 6.6% in the euro area.
The recession was less severe due to low contagion numbers, swift and coordinated policy responses, and relatively resilient exports.
Private consumption fell sharply, driven by lockdowns and low e-commerce development.
Inflation turned negative in 2020 due to weak domestic demand and lower energy prices.

Fiscal Response

A large fiscal support package, amounting to ~12% of GDP, was implemented to preserve jobs, support companies, and provide income support to vulnerable groups.
Fiscal deficits rose to 4.5% of GDP, and public debt increased to 44% of GDP.
Fiscal support was well-targeted, but less than half of the measures were disbursed in 2020, partly due to uncertainty and narrow eligibility criteria.

Financial Sector

The financial sector absorbed the crisis well, with banks in a strong capital and liquidity position.
Loan defaults (NPLs) decreased in 2020, but some sectors, particularly contact-intensive ones, saw an increase.
Credit growth to the private sector remained negative in 2020, and loan interest rates remained high despite accommodative ECB policy.
Forbearance measures were extended by the ECB and FCMC to help absorb shocks.

Current Account and External Position

Current account improved to 3% of GDP in 2020 due to weakened domestic demand.
The external position was stronger than medium-term fundamentals and desirable policies would imply.
Net external debt fell to 14.3% of GDP in 2020, reflecting improved external balances.

Labor Market

Unemployment rose to 8.1% in 2020, slightly above the euro area average.
Job losses were concentrated in trade, accommodation, and food service sectors.
Wage growth was relatively strong, at 6% in 2020, but growth decelerated in 2021.

Recovery Outlook

A strong recovery is expected in 2021 and 2022, with GDP growth projected at 3.6% and 5.2% respectively.
The recovery will be supported by pent-up demand, precautionary savings, and EU-financed investment.
Uncertainty remains high, with risks from resurgence of new variants, slow vaccine rollout, or delayed treatments.
Rapid vaccine rollout could accelerate recovery and prevent long-term scarring, but may also increase inflationary pressures.

Key Policy Recommendations

Fiscal Policy

Fiscal support should remain until recovery is entrenched.
Fiscal rules should be used to rebuild buffers and facilitate structural transformation.
Public investment should focus on green and digital transformation, as well as social protection.
Fiscal space needs to be maintained to support long-term reforms and address demographic and social costs.

Financial Sector Policies

Banks should continue monitoring asset quality, especially in sectors affected by the crisis.
An exit strategy from support measures should be carefully planned to prevent financial instability.
AML/CFT framework should be further improved to ensure transparency and efficiency.

Structural Policies

Labor market policies should be proactive, with a focus on job preservation, labor mobility, and active labor market programs (ALMPs).
Investment in digital and green technologies is crucial for boosting productivity and sustainable growth.
Minimum wage should be monitored to avoid undermining competitiveness.

Key Information

Economic Indicators (2017–2022)

Real GDP grew at 3.3% in 2017, 4.0% in 2018, 2.0% in 2019, -3.6% in 2020, and is projected to grow by 3.6% in 2021 and 5.2% in 2022.
Unemployment rate rose to 8.1% in 2020, and is expected to decline to 7.2% by 2022.
Public debt is projected to peak at 48% of GDP in 2021, then decline to 47.9% by 2022.
GDP per capita is expected to increase to 17.5 thousand euros by 2022.

Risks and Challenges

High uncertainty in the economic outlook due to pandemic-related factors.
Vaccine hesitancy and low vaccination rates among the elderly could hinder recovery.
Construction sector capacity constraints and skilled labor shortages are key concerns.
Fiscal sustainability is important as the fiscal deficit is expected to widen to over 8% of GDP in 2021 before declining.

Governance and Transparency

Transparency and governance are emphasized, especially in public investment, project selection, and procurement.
AML/CFT reforms are progressing, and further improvements are recommended.
Public investment plans are well-aligned with green and digital transformation goals.

Conclusion

The IMF Executive Board commended Latvia’s policy response to the pandemic and its resilience in the face of economic disruption. While the recovery is expected to be strong, uncertainty remains due to pandemic dynamics and vaccine rollout progress. Fiscal and structural policies should continue to support the recovery, preserve financial stability, and promote long-term, inclusive, and sustainable growth.