Spillover from Russian Crisis Hits Latvian Economy, but So Far the Damage is Limited

From the beginning, it was clear that the economic crisis in Russia would pose multiple problems for Latvia and its Baltic neighbors. Until recently, many businesspeople in Latvia had seen close trade, transportation, and financial linkages as strengths that allowed their country to serve as Russia’s economic portal to the EU. Since the middle of last year, a collapse in oil prices, compounded by sanctions and countersanctions arising from the Ukraine conflict, have sent the Russian economy into a tailspin. Latvian ties to Russia have become liabilities rather than assets.

As the chart shows, growth of the Latvian economy has slowed since the Ukraine conflict began in the spring of 2014, but not come to a halt. According to preliminary data for the first quarter of this year, growth remains equal to the Eurozone average, which itself is improving. In that regard, Latvia has done better than neighboring Estonia and Lithuania, which have also felt the impact of conditions in Russia. >>>Read more