RIGA, July 2 (Xinhua) -- Latvia's tight labor market may hold back the country's medium and long-term growth, Iva Petrova, head of the International Monetary Fund's (IMF) mission to Latvia, said at a news conference here on Monday.
Availability of skilled workers continues to decline in Latvia because of emigration but the scarcity of workforce is pushing wages up, undermining businesses' competitiveness, the IMF official said.
Meanwhile, the ageing of Latvia's workforce is likely to reduce its productivity in the long run.
The IMF mission currently working in Latvia has also come up with a number of recommendations aimed at removing existing employment restrictions in order to involve larger population groups in the labor market and reduce structural unemployment.
The reforms recommended by IMF include a more extensive coordination of skills, improving housing availability, restructuring the minimum wage and promoting the immigration of workforce.
Productivity-boosting reforms will be crucial for dealing with the negative demographic trends that are going to affect Latvia's long-term growth, the IMF mission said.
On the whole, the IMF forecasts Latvia to show moderate economic growth, its macroeconomic indicators to remain fairly strong and the financial system stable in the medium term.
The IMF expects Latvia's GDP growth to become more moderate in the medium term. This year, the Latvian economy will likely expand by 3.7 percent on a faster inflow of EU funding and continued wage growth, although external demand is going to become weaker.
It also warned that the stability of the Latvian financial sector might suffer if banks failed to comply with AML/CFT (anti-money laundering/combating of the financing of terrorism) standards or overhaul their business model to get rid of suspicious nonresident clients.
The latest IMF mission to Latvia lasted from June 20 to July 2.
IMF representatives arrive in Latvia on monitoring missions on a regular basis to assess the shape of the country's economy, meet with Latvian government officials and provide advice if necessary. The IMF is expected to draw up a report on Latvia after the visit.
