The central bank of Latvia on Wednesday criticised a report issued by the European Commission (EC) warning of sharp economic downturn, according to dpa. "If they came out with it a year ago that would have helped us persuade (former Prime Minister Aigars) Kalvitis," bank spokesman Martins Gravitis told Deutsche Presse-Agentur dpa. "Besides its economic balancing works, the government should more often and deeper inform the European Commission to avoid such inadequate reports published under the name of European institutions," Gravitis said in a released statement. The EC report released in Brussels urged Latvia, which joined the European Union in 2004, to tighten the fiscal policy and control wages. The EC said Latvia seemed to be misjudging the risks to its economy from high inflation, overheating domestic demand and external imbalances. With the fastest-growing economy among the 27 EU nations, Latvia's economic growth slowed down from 10.9 per cent of the gross domestic product (GDP) in the third quarter to 9.6 per cent in the fourth quarter. However, the Baltic nation's central bank believes that Latvia's economic indicators in the past six months show that Latvia is successfully reducing risks of hard landing. A wage-price spiral, the lat currency's peg to the euro and labour shortages resulted in the economic imbalances, the report said. "The programme's economic scenario is attended by very high risks for macroeconomic stability, with a harder landing being a distinct possibility," it said. "Furthermore, without a larger adjustment of aggregate demand and supply than depicted in the programme, the country's external position would not be sustainable in the longer run." Latvian inflation hit 15.8 per cent in January, the highest mark since 1996. At the same time, the current-account deficit - the widest in the EU - reached 24.8 per cent of the GDP. The centre-right government anti-inflation measures announced in May 2007 to slow consumption and tighten lending may curb rising inflation this summer, Ilmars Rimsevics, the government of the Latvian Central Bank has said in January. Riga announced on February 5 that it would introduce no new steps to tame the inflation because local economists and the central bank expect the inflation to subside in the middle of the year.
