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Baltic States

Page history last edited by Brian D Butler 9 years, 8 months ago

 

Location of Baltic states
 

Baltic states:  Estonia, Latvia and Lithuania have been members of the European Union and NATO since 2004. Today the three countries are liberal democracies and their market economies have in recent years undergone rapid expansion.

 

Members of the EU, but not of the "euro" currency.... instead, they all have a "currency peg" with the Euro...trying to keep the value of the currency the same...which as caused all sorts of problems...

 

 

 

Crisis 2008/09

 

Problems caused by years worth of " are the result of reckless borrowing and slow reforms"

 

Recently (as of 12/2008):  "Latvia’s central bank has burned through €1 billion ($1.4 billion), around a fifth of its reserves, since mid-October to defend the national currency, the lat. This is pegged to the euro in an arrangement similar to a currency board...

 

see details in our page:  Latvia

 

 

 

 

a financial tour of Sweden, Latvia, Estonia and Lithuania

 
 

Current account deficits, fixed exchange rates and Eastern Europe:  Eastern Europe is full of vulnerable currencies. Most of the countries have fixed their exchange rate to the Euro (hoping I guess for Euro membership at some stage) and have massive current account deficits. Latvia is particularly bad. The exchange rate is pegged (as per this page from the central bank of Latvia). The current account is enormous, almost 25% of GDP. There is no doubt whatsoever this exchange rate is not sustainable. Not close.

 

As the Latvia economy watch blog will point out Latvia is suffering the results of the beginnings of the credit crisis caused by fixed exchange rates and a run on the capital account.

 

Estonia is not much better. It too has a large current account deficit and its currency (the Kroon) is also fixed to the Euro.  Estonia’s economy is also suffering the effects. The current account deficit never got quite so bad in Estonia – but it not pretty.

 

Lithuania is a little better – maybe only marginally more unsustainable than the United States.

 

read more from Bronte Capital blog posting here

 

 

Economies

Main article: Baltic Tiger

 

The Baltic states had the highest growth rates in Europe between 2000 and 2006, and this has continued in 2007. In 2006 the economy in Estonia grew by 11.2% in gross domestic product, while the Latvian economy grew by 11.9% and Lithuania by 7.5%. All three countries have seen their rates of unemployment falling below the EU average by February 2006. Additionally, Estonia is among the ten most liberal economies in the world and in 2006 switched from being classified as an upper-middle income economy to a high-income economy by the World Bank. All three countries are slated to adopt the Euro around 2012.

 

However, due to global economic crisis, Baltic economies in 2008 are fragile and previous fast growth has switched to recession in Estonia and Latvia by the end of 2008.

 

One negative characteristic of the Baltic states' economic growth has been a substantial growth in the current account deficit and external imbalances. This has led some economists to predict a risk for a "hard landing" scenario and financial crises in Latvia and Estonia. On the other hand, central banks in both countries have reserves exceeding the M1 money supply and the biggest private banks are owned by solvent Scandinavian giants.

 

 

 

 

 

Data:

 

 
Capitals Tallinn; Riga; Vilnius
Official languages Estonian; Latvian; Lithuanian
Membership  Estonia
 Latvia
 Lithuania
Area
 -  Total 175,015 km2 
67,523 sq mi 
Population
 -  2007 estimate 6,980,000 
GDP (PPP) 2008 estimate
 -  Total $131,812 billion [1] 
 -  Per capita $19,136 
GDP (nominal) 2008 IMF October estimate
 -  Total $107,856 billion [2] 
 -  Per capita $16,065 

 

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