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The Latvian Economy, May 20, 2011

20-05-2011 14:48

Demographics – can one see a forest behind the trees?

  • The rebound effect of Latvian economic growth gets weaker. Future growth will increasingly depend on the economy’s fundamental strength, i.e., the ability of businesses to invest and export, as well as the ability of households to spend. Surprisingly, the weak economic growth in the first quarter of this year clearly shows a need to continue structural reforms.
  • Negative demographic tendencies are becoming an increasingly important challenge – they place an additional burden on the government budget and undermine economic growth. Moreover, this is not an abstract future question – the negative influence of this risk can be felt already now. When developing and implementing structural reforms, it is necessary to take into consideration demographic tendencies, both regarding the sustainability of social and pension systems and the effectiveness of regional administrative reform.

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