Macroeconomic Forecast Expanding At A Record Pace

Latvia's economy continued to expand in Q305 at the record-high rate of 11.4% achieved in Q2. The momentum in the economy is very strong and higher frequency data suggest no let-up in activity in Q4. Consequently, BMI has revised its estimate for 2005 growth up to 10.2%. The current pace is clearly unsustainable, and we project a decline in the growth rate to 7.9% in 2006 and to 7.1% in 2007.The upturn continues to be led by domestic demand, although unlike in the previous few years net exports made a significant contribution to GDP in 2005, accounting for 36% of

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