8. pants

While the slowdown in the world

economy may lead to a moderation of growth in Latvia in the short

run, we expect that, over the medium term, strong growth will

materialize in a low inflation environment. Our main

macroeconomic objectives for 2002 and beyond are as follows: (i)

real GDP growth at 41/2 percent in 2002 and 6 percent annually

thereafter; (ii) inflation at about 3 percent per year; and (iii)

containing the external current account deficit at about 7

percent of GDP in 2002, with a gradual improvement expected from

2003 onwards. We also anticipate a continuation of strong FDI

flows so that at least two-thirds of the current account deficit

will be financed through these flows, thereby keeping our

external debt indicators at low levels.

Fiscal Policies