Republic of Latvia: 2024 Article IV Consultation-Press Release; and Staff Report

International Monetary Fund

No 2024/284, IMF Staff Country Reports from International Monetary Fund

Abstract: The 2024 Article IV Consultation highlights that the Latvian economy contracted with significant disinflation. Amid high uncertainty, growth is projected to rebound, but risks are tilted to the downside. Considering the improving outlook, the IMF Staff recommends a less expansionary, neutral fiscal stance for 2024 and a tighter fiscal stance in 2025. Although Latvia has some fiscal space, structural fiscal measures are needed to provide buffers for medium to long term spending pressures. Although the financial sector has so far been resilient, continued monitoring of macrofinancial vulnerabilities and spillovers is warranted. While the current macroprudential policy stance is broadly appropriate, the recent adjustment to the borrower-based measures for energy-efficient housing loans should be reconsidered. The overall policy stance strikes the right balance between maintaining financial stability and the need to extend credit to the economy. However, borrower-based macroprudential measures should be relaxed only when their presence is overly stringent from the financial stability perspective.

Keywords: World Bank-International Monetary Fund mission; IMF-World Bank mission; audit committee charter; executive board assessment; anti-corruption plan; Labor markets; Productivity; Fiscal stance; Inflation; Baltics (search for similar items in EconPapers)
Pages: 79
Date: 2024-09-05
New Economics Papers: this item is included in nep-cis and nep-inv
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