Baltics

RGE's Q1 2010 Baltics Outlook

The three Baltics states—Estonia, Latvia, Lithuania—underwent severe recessions in 2009. From a combined growth rate of almost 9% per year from 2003 to 2007, the Baltics landed hard, contracting 15% in 2009, the sharpest recessions in the EU. The global crisis coincided with the end of their credit-induced boom years, during which massive macroeconomic imbalances were amassed. The three Baltic economies all have exchange rates fixed to the euro. To restore competitiveness, they have embarked on a path of internal deflation (economic adjustment via wage and price cuts) rather than devaluation, which would have derailed their hopes for near-term euro adoption. So far, Latvia is the only Baltic state to require a bailout package. In October 2008, the country turned to an EU/IMF-led coalition for €7.5 billion in financing after a local bank there failed.

Read the Q1 2010 Baltics Outlook.