Latvia learns from the biggest crash of them all
The economy has gone a double-digit economic boom to a double-digit recession. Guy Norton reports on how the embattled Baltic state is coping.
THE NARROW COBBLED streets of the Old Town area of the Latvian capital of Riga are still clogged with luxury cars but an outsider’s first impressions are deceptive. A closer examination of the harsh realities of the downturn in the Latvian economy points to a different picture of life in the Baltic state after GDP shrank by 18% last year.
Car repossessions because of loan defaults outnumbered new purchases in 2009, with repo men the only beneficiaries and former owners, car salesmen and leasing companies the prime victims.
The trials and tribulations of the car market following the triumphs of previous years perfectly illustrate the dangers of excess that have come to haunt Latvia in the past 18 months. In the middle of the last decade Latvia was touted as one of the great economic success stories of New Europe.