Escalating Problems

Since the start of the global financial crisis, every country in the world has experienced some economic troubles. Many countries in Eastern Europe have seen hasty declines in the level of output from the workforce. Most notably is Latvia which took a hit of 10% to their GDP last quarter. Everything from airfare and car rentals in Latvia to souvenirs and food service have seen a decrease in revenues. At the end of 2008, Latvia was approved for a 1.68 billion euro bailout plan which is roughly 15% of the total 7.5 billion euro package for needy EU countries. The price to save Latvia is so high because of all the money currently depending on the value of the Latvian currency. There would be dramatic repercussions for many European countries if the Latvian Lat decreased in value. The plan for the money is to help keep it as stable as possible which is basically counterproductive for the workers and consumers. Coupled with the EU/IMF bailout plan is an increase in unemployment and consumer taxes causing a decrease in the country’s national output. Unfortunately for Latvia, things are going to get worse before they can get better.

Optimistic Solutions

There are some positive aspects of the Latvian economy however; they have agreed to keep their national debt at a low level to ensure the integrity of the currency and they have received support from neighboring countries that import their goods. This should most likely keep Latvia from plummeting into an uncontrollable financial downfall, but the short-run will prove difficult with high prices and low wages. There have already been massive downsizing operations in the public and private sectors and the end seems nowhere in sight.

With the financial crisis mounting in Latvia, it has brought about the total overhaul of the current administration. Many of the top financial and political leaders have resigned or been removed from office due to their obvious incompetence. The future can have some hopefulness with the appointment of a new prime minister Valdis Dombrovskis and his modern economic policies. He has already announced there will be huge government budget cuts to help save the country from bankruptcy. One more promising ray of light is the upcoming tourist season and the anticipation of extrinsic cash flow.

Tourism in Latvia

The summer has always been a great time for increased revenue from tourism. The weather is warm, the days are long, and the rest of the world comes to have a unique Latvian vacation. In the past, prices have risen dramatically in the summer to even further increase the impact of the tourism money, however this year could be much different. Latvian businesses dependent on tourism cannot afford to radically raise prices because they desperately need the people to come. There have been early reports of consumers haggling for lower prices at stores, markets and even hotels. The influx of tourism is going to be a great relief to a nation in trouble and the local prices should remain reasonably unchanged. This summer could be one of the best times to visit Latvia and help the country’s monetary situation while not really hurting your own. European countries are notorious for adjusting prices during the tourist season and Latvia has been no exception. This year there will be much different because of the high demand for tourism. Contrarily, you need to be careful when booking your trip because as some places will try to attract tourists with lower prices, others may increase them to an even greater level than previously seen. The times are difficult in Latvia and most people are trying to earn extra money any way they can. You will need to be aware of possible scams and ridiculous overpricing to ensure your money will go as far as possible. If you do some careful planning and know what to look for, you can have a fun and inexpensive holiday in Latvia.