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Following an exceptionally strong 2017, economic growth will moderate somewhat in 2018, to around 4%, as investment decelerates due to the slower pace of disbursements of EU funds. Emigration and low domestic labour mobility lead to skills shortages and mismatches, contributing to strong wage growth and rising inflationary pressures. Strong domestic demand will keep import growth high.
Fiscal policy will remain expansionary following tax reforms and welcome spending increase on health care. Reallocating spending toward higher minimum income support, better access to health care, more generous financial support for poor students, and policies to improve access to affordable housing in regions with strong employment growth would reduce poverty and boost productivity growth.
Economic Survey of Latvia (survey page)