The Latvian economic gambit. Part 2

Between 2005 and 2008, Latvia's economy grew by a third and wages doubled. But the economic crisis essentially threw the country back to 2005.

Medium and large businesses, before the crisis, did not have large debts, and the public debt was almost 10 percent of GDP. In Greece, everything is bigger: the debt before the crisis and up to now amounts to 100% of the country's GDP.
Latvians have shown resilience in the face of difficulties, particularly because memories of the economic collapse after the collapse of the Soviet Union in 1991 are still fresh.
The Greeks, on the other hand, increased spending and continued to borrow beyond the bounds of prudence.
Most economists seemed to support the arguments of Prime Minister Valdis Dombrovskis and the Central Bank that internal devaluation was the only correct solution. The devaluation of the lats would have given only a small boost to export products, because Latvia has to import energy and materials to produce them, which would have affected the cost of production (prices increase). "About 85% of our loans were in euros, so devaluation would create huge problems for the banking sector, businesses and ordinary people," Mr. Dombrovskis explained. After the devaluation of the national currency, the emigration of Latvians drowning in debts would increase by an order of magnitude.
But still, fears for the country's future exist.
Mihails Hazans, an expert on migration, said that Latvians went abroad to work, even during the years of economic recovery. But mostly it was one of the family members who then returned home. From 2004 to 2008, the number of "clean" (permanently left) emigrants averaged 16,000 per year.
During the crisis, this figure rose to 40,000 per year. Young and educated, entire families left the country, many of them for permanent residence. The same figure will continue in 2011, despite the growth of the economy (4.5 percent this year) and falling unemployment.
Hazans believes that because there are not enough people of working age, the government will face the problem of financing the pension system and a shortage of labor for new investments.
The Latvian government is taking measures to stimulate the birth rate and support young families. But some Latvians are skeptical about it.
"I'm afraid that Latvia may become a kind of hospital for the elderly... -says Ivar Indans, a doctoral student. -... People are leaving the country and I don't see any prospects".

Based on foreign press materials for ForTrader.ru