Macroeconomic Forecast Latvia

According to the latest data from the Central Statistics Bureau, Lativan inflation slowed to 13.8% y-o-y in October, down from 14.9% in September, though still remained above the 13.2% seen in October 2007. A slowdown was seen in all subcomponents except 'housing, water, electricity, gas and other fuels' and 'furnishing, household equipment and household maintenance' which rose by 31.5% y-o-y and 3.8%, respectively. We expect inflation to slow to 11.2% and 6.4% at end-2008 and end-2009, respectively. This will be driven by the continued fall in commodity prices and a substantial slowdown of domestic demand within Latvia.

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