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Growth is strong and broad-based, but is projected to moderate to under 3½ per cent by 2020. Private consumption will be supported by a persistently strong labour market. Following a slump, investment rebounded strongly in 2017-18, as investors have drawn on EU structural funds, but growth in capital spending will ease to more sustainable levels in the coming two years.
The budget impact of personal and corporate income tax reforms in 2018 and 2019 are compensated only partially by higher excise taxes and some spending restraint. Fiscal policy is mildly expansionary as a result. Higher spending on health helps to improve currently unequal access to health care. The government plans to improve re-training and develop the rental market to strengthen labour mobility, which is a welcome move to address skill shortages and mismatches.
Source: Central Statistical Bureau of Latvia; Eurostat; and OECD Economic Outlook 104 database.
Economic Survey of Latvia (survey page)