Macroeconomic Forecast Latvia

We have slightly revised up our year-end forecast for Latvia's real GDP growth to 3.4% y-o-y, from our previous forecast of 3.1%. First quarter real GDP growth posted an exceptionally strong reading of 6.9%, largely due to stronger than expected demand. However, we underscore that while Q112 experienced more benign external conditions than expected, we believe that economic activity will begin to slow more sharply, particularly moving into the second half of 2012, as slowing eurozone economic activity begins to weigh on external demand.

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