The country’s development is specific among the European Union members in two aspects, i.e. on one side there is a fastest-growing in the Union GDP (about 7-8 %), on another — it has the highest in the Union inflation (about 7 %).

Some general factors reflecting Latvian economic development can be mentioned:

• Stable growth in the GDP outcome regardless of inflation and other negative trends.
• Good growth rates have been observed in service sector, in construction industry and to a certain degree in manufacturing.
• Major driving force behind GDP growth is private consumption and growth rates in export (about 34 % -twice as much as before EU accession), although with adequate growth in import (about 27 %); the old EU members constitute about half of Latvian export.
• Labour shortage as a result of massive workers’ migration to, mainly, the UK and Ireland, has pushed wages up (almost 10 % of labour force has left the country for good). Labour shortage and high inflation already pushed wages up by 17 % in 2005.
• Retail sales grew by 21 %, housing loans almost doubled, new car sales increased by 48 %.
• Consumption and living standards are still well below average EU figures.
• The current account deficit is above 12 % of GDP and there is still strong demand for merchandise imports, mainly from the EU states.
• Inflow of foreign direct investments covers only a third of the current account deficit.

The Baltic Course