Latvia's economy struggling

Latvia's economy shows signs of struggle with growth dropping. The housing market here continues to cool.

The housing market in Latvia has cooled. The country where a 2006 housing boom was underway, has drastically dropped off the investor's front page mainly due to the fact that the economy here is struggling.

The continuous increases in interest rates have hurt many industries and especially that of the housing markets in this area. Other Baltic countries including Estonia and Lithuania are facing the same thing: a drop in the economy and therefore housing markets. It is a hard drop, and it has already hurt the country's markets so far this year.

In the fourth quarter, the country's economy grew by 8%, which is the slowest amount of growth the country has seen in the last two years. Several things have hurt the economy here including trade that has slowed and manufacturing declines. The country is still one of the fastest growing in the European Union, just behind Lithuania, in fact.

The housing market here is affected indirectly as the country's rates continue to expand. The drop in the economy growth in the fourth quarter may be an indication of inflation happening here. That will prompt additional rate hikes, which would further hurt a struggling housing market, most believe.

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