Brutish Socialism In Latvia?

Claus Vistesen at Alpha.Sources has done a terrific data work making preliminary assessment of brutish rebalancing in the Baltics:

Compared with the average quarterly value of GDP in 2007-08, the first two quarters of 2009 are down in nominal terms to the tune of 15.9%, 15.4% and 10.5% in Lithuania, Estonia, and Latvia respectively.

The average quarterly current account deficit of the Baltics from Q3 2008 to Q2 2009 was mill 500 Euros. This amount to just 18% of the average quarterly current account deficit two years prior to the crisis. Consequently, the Baltics have delevered to the tune of 80% over the course of less than 1 year.

In the two first quarters of 2009 (relative to Q1-2006 to Q4-2008), imports have contracted 16%, 33% and 11.5% more than exports in Lithuania, Latvia and Estonia respectively.

In Euro terms, the Baltics have lost external financing to the tune of bn 1.87 Euros in the first half of 2009 compared to the peak of the boom which amounts to 12.6% of the entire region's GDP in the same period.

However, the internal deflation will still make its impact anyway:

So far, a preliminary assessment suggests that while the Baltics are indeed rebalancing, they are only doing so because internal demand has caved in. We are yet to see whether the dose of internal devaluation/deflation will bring back competitiveness in due time to turn a vicious cycle into a virtuous one.

Further on, Danske Bank in its EMEA Daily note writes today:

Unemployment in Latvia rose to 18.4% in Q3, up from 16.7% in Q2, as the sharp economic downturn has taken its toll on the labour market.

This (the unemployment in Latvia), of course, reminds me of a chart I saw at Calculated Risk in relation to US last week... The Swedish new economy banks?

Click on chart to enlarge, courtesy of Calculated Risk.


Not that different in Latvia? I have a doubt of linearity of the function ...