1. Macroeconomic situation

2. The economic downturn has been suspended Gross Domestic Product Seasonally adjusted data, 4th q of 2005 = 100 2 Exports and Domestic Demand Seasonally adjusted data, 4th q of 2005 = 100

3. Competitiveness are improved 3 Productivity and Labour Costs 4th q of 2006 = 100 Real Effective Exchange Rate Index, December of 2006=100

4. Distribution of Latvian exports’ growth to the EU using a permanent market share analysis (%) 11% of exports decline was effected by decreasing competitiveness -27.9% +22.3% 40% of exports growth was driven by increasing competitiveness Factors affected changes in exports 4

5. The role of tradable sectors in the economy are increasing %, against corresponding period of previous year 5

6. Production volume in manufacturing are increasing 6

7. 7 Situation in Labor market are improved Employment 4th q of 2007 = 100 Unemployment rate % from economically active persons

8. Forecasts %, against corresponding period of previous year 8 GDP : -18% 0% 3,5% GDP : in 2009 -18% in 2010 0% in 2011 3,5% Seasonally adjusted data, 4th q of 2005 = 100

9. Economic development trends Substantial inflow of capital Growing domestic demand Rapid growth 2004-2007 Growth driver – domestic demand 2008-2010 Impact of the global financial crisis and imbalances 2011-2015 Growth driver – external demand Emerging risks:  Internal imbalance  External imbalance  Inflow of foreign capital decreases in Latvia Balancing of the current account Domestic demand decreases  External demand decreases GDP decreases Global financial system recovery External demand increases Latvian exports grow Domestic demand increases GDP increases 9

10. Economic policy priorities aimed to change economic model Increase of productivity and competitiveness:  Increase efficiency of production/decrease production costs  Support for the implementation of new products and technologies/support to innovations  Export promotion (attraction of FDI)  Access to finance  Support to business start-ups and micro- enterprises 10

11. Developement trends in medium term Gross Domestic Product, 2004 = 100 Rapid development scenario (in 2012-2015 average annually GDP growth rate: 4,5% ) Moderate development scenario (in 2012-2015 average annually GDP growth rate: 3% ) 11

12. Thank you for your attention! Brīvības iela 55, Rīga, LV 1519 Tel.: 67013101 Fax: 67280882 E-mail: pasts@em.gov.lv Homepage: www.em.gov.lvpasts@em.gov.lvwww.em.gov.lv