Upbeat economic data in the Baltics

May 10, 2010, 15:25 GMT

Riga - Economic data released in Latvia, Lithuania and Estonia on Monday suggested the worst of the Baltic states' deep recessions may be over.

In 2009, Latvia experienced the deepest recession in the European Union, with its economy shrinking by 18 per cent, while neighbouring Lithuania saw its economy contract by 15 per cent in 2009, and Estonia reported a recession of 14 per cent.

On Monday, preliminary economic data released by Latvia's national statistics office showed gross domestic product (GDP) shrank by just 6 per cent year-on-year in the first quarter of this year.

In the previous quarter, GDP shrank by 16.9 per cent. The latest data represents a significant turnaround, especially as the seasonally-adjusted figure showed positive growth of 0.3 per cent after eight consecutive quarters of contraction.

'These figures are the first important confirmation that the course chosen by the Latvian government - reviving growth via export channels - is working,' the Finance Ministry said in a statement.

'Such an increase in GDP data is highly symbolic,' said Latvijas Krajbanka analyst Olga Ertuganova. 'After two years of decline, the Latvian economy has finally recorded a rise.'

In neighbouring Lithuania, fresh data showed only a modest rise in inflation from minus 0.2 per cent in March to plus 0.3 per cent in April, suggesting that some degree of price stability was being achieved.

'There is no fundamental reason for significant inflationary pressure in Lithuania, mainly due to an expected reduction in wages and fall in private consumption,' said Danske Bank analyst Violeta Klyviene.

Meanwhile, Estonia's good news took the form of confirmation that it will become a full member of the Organization for Economic Cooperation and Development (OECD) on May 27, despite the 2009 recession.

The OECD said in Paris that Estonia, along with Israel and Slovenia, would be admitted to the powerful trade organization of 31 countries following nearly three years of accession negotiations and reviews by 18 different OECD committees.

The announcement provided a boost just two days ahead of an expected recommendation by the European Central Bank and European Commission on whether Estonia should be allowed to adopt the euro as its currency from 2011.