Inflation in the Baltic state is the highest in the European Union, hitting 16.7 percent year-on-year in February. The central bank expects it to fall in the second half of the year. Economic growth fell to 8 percent in the last quarter of 2007 from 10.9 per cent in the previous three months.

"The measures so far taken have without a doubt been effective and no more are needed now," Finance Minister Atis Slakteris said in interview to business daily Dienas bizness. He said brakes had been put on the economy and now it was time to think whether it was time to ease off the brake pedal.

At the same time, Latvia needed a budget surplus, he added. The government is planning a 1 percent budget surplus for this year, a main ingredient in an anti-inflation plan launched in March last year. It also involved banks tightening lending and credit growth has fallen.

Slakteris said a main goal of the government should be to boost exports as Latvia could not allow a situation where economic growth depended on domestic demand. He also backed dropping a requirement that people wanting to buy property had to have a deposit of at least 10 per cent of the purchasing price.

"However, I am not saying we should do that immediately, that can be done at some point," he added. "International financial organisations and experts are looking at how Latvia is dealing with its anti-inflation plan and also inflation has not gone down yet," he said. The central bank on Thursday said it would cut commercial bank reserve requirements to 6 percent from 7 per cent, saying it wanted to loosen credit policy as the economy was slowing.

 

Source: economictimes.indiatimes.com