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E&Y: Latvia Positioned to Replace Estonia as Eurozone's Fastest-Growing Economy 13.03.2013

The Latvian economy is set to be the new darling of the Eurozone and will gain considerable momentum when it joins the monetary union next year, according to Ernst & Young Baltic partner Ivar Kiigemägi.

Last quarter, economic growth in all three Baltic countries outpaced all other EU member states, with Latvia in the lead, followed by Estonia. Estonia, however, is the only one of the three that is in the Eurozone.

A fresh Ernst & Young report forecasts 3 percent GDP growth for Estonia in 2013 and 4 percent in 2014. Latvia's 2014 outlook is looking even better, on course to again outpace Estonia's economy next year, according to Kiigemägi.

"Estonia will only enjoy its place as the top student in the classroom until Latvia joins," Kiigemägi said.

And Latvia won't have to fear the soaring inflation that Estonia faced when it joined the Eurozone, according to the analyst.

"While in Estonia, the changeover to the euro coincided with several other important changes in the economy, Latvia's changeover, it currently seems, will not be accompanied by major inflation," Kiigemägi said.

MP Aivar Sõerd, a former finance minister, lauded progress by Latvia, which is currently up for evaluation for joining the Eurozone.

"As with Estonia, Latvia has carried out responsible budget policies and the addition to the Eurozone of a country with sound finances will add value to the monetary union as a whole [...] Latvia's accession to the euro area is also in the interests of Estonia and Lithuania because it adds confidence to this economic region and will bring new investments to the Baltic states," Sõerd said.

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