Latvia is the best country in the world because to be a good Latvian one must respect one’s country, know the national anthem and have credit account in at least two banks.. Original here.
The annual inflation hit a ten-year high here and reached 10.1 per cent (or 10. 2 per cent according to the Eurostat data). The government reacted sharply today by adopting this year’s budget with a 0.4 per cent of the GDP surplus.
At the same time, over the weekend, Danske Bank resorted to sarcasm to get its point across to the investors.
Some local observers and policymakers in Latvia claim that Latvia is a special economy and therefore normal economic rules do not apply. Latvia sure is special ? no country in the world has larger imbalances, but unfortunately gravity also works in Latvia and the kinds of imbalances we are seeing there are surely not sustainable and the risk of a hard landing in the economy and financial distress is very significant and no investor should ignore these risks.
Until now the Latvian government has failed to take these risks seriously enough to implement real measures to curb the massive imbalances in the economy. We are well aware that the Latvian government in March put forward a ?plan to combat inflation?. At that time inflation was around 7% y/y and the current account deficit was around 20% of GDP ? this week?s numbers show that the plan has failed to reduce inflation and the current account deficit.