After joining the EU in 2004, Latvia experienced rapid economic growth with annual gross domestic product (GDP) rates exceeding 10%, house prices increasing fourfold and income growth reaching 30% annually. No wonder it produced intensive levels of consumer spending.
Latvia's service and construction sectors grew rapidly, but manufacturing was left lagging behind. Strong domestic demand and a disproportionate current account balance pushed inflation beyond the 10% threshold. But, at some point, the process spiralled out of control.
