oriented Latvian economy needs normality in its relations with Russia. With regard to
this fact, one must welcome Latvia’s search for a regular political dialogue with Russia,
from which the Latvian economy can only profit.
The positive monetary framework - a stable exchange rate of the Lats to the basket cur-
rency of the IMF, an inflation rate of less than three percent the second year in a row -
as well a fiscal policy with the aim of a balanced budget are increasingly attracting fo-
reign investors. In spite of the Russia crisis, the cumulative stock of inward direct in-
vestments has more than doubled during the last four years. The direct investment, to-
gether with the income from the transit business, essentially contribute to the financing
of the balance of payments deficit.
The final negotiations with the IMF in spring 2001 and the new co-operation memoran-
dum for the next 18 months testify that the reform process of the government is appreci-
ated by the experts. Latvia has a good position in various rankings. The latest “Institu-
tional Investor” credit-rating list, drawn up by globally active banks, security businesses
and unit trust funds, places Latvia at rank 57 out of 145 evaluated countries (1999: 59),
between Egypt and Slovakia; among the Central and Eastern European EU-candidates
this means the 6th rank behind Slovenia, Czech Republic, Hungary, Poland and Estonia.
Within the internationally-renowned rating agencies Standard & Poor’s, Moody’s and
Fitch, the favourable assessment of its credit worthiness remains unchanged with BBB,
Baa2 and BBB.
The reform efforts, which have been undertaken, bring Latvia closer to the targeted EU-
entry. In its latest progress report the European Commission appreciates the success,
which has been achieved and identifies the deficits, which still exist for example the
unsatisfactory ability of the judiciary system and the public administration, strongly
widespread corruption and delayed privatisation of large-scale companies from the in-
frastructure area. If Latvia maintains its present reform course, it can count on the EU-
membership in 2005-2006 at the earliest.
Lithuania
From the economic point of view, the year 2000 was successful for Lithuania. The real
GDP - after a strong slump in 1999 - rose by more than 3 percent last year with a mod-
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