2 million of goods and services to Latvia and imported $87.9 million. Eager to join Western economic institutions like the World Trade Organization, OECD, and the European Union, Latvia signed a Europe Agreement with the EU in 1995—with a 4-year transition period. Latvia and the United States have signed treaties on investment, trade, and intellectual property protection and avoidance of double taxation.
Economic contraction
The Latvian economy entered a phase of fiscal contraction during the second half of 2008 after an extended period of credit-based speculation and unrealistic appreciation in real estate values. The national account deficit for 2007, for example, represented more than 22% of the GDP for the year while inflation was running at 10%.
Latvia's unemployment rate rose sharply in this period from a low of 5.4% in November 2007 to over 22%. In April 2010 Latvia had the highest unemployment rate in the EU, at 22.5%, ahead of Spain which had 19.7%.
Paul Krugman, the Nobel Laureate in economics for 2008, wrote in his New York Times Op-Ed column for December 15, 2008:
"The most acute problems are on Europe’s periphery, where many smaller economies are experiencing crises strongly reminiscent of past crises in Latin America and Asia: Latvia is the new Argentina "
However by 2010 commentators noted signs of stabilisation in the Latvian economy. Rating agency Standard & Poor's raised its outlook on Latvia's debt from negative to stable. Latvia's current account, which had been in deficit by 27% in late 2006 was in surplus in February 2010. Kenneth Orchard, senior analyst at Moody's investors service argued that:
"The strengthening regional economy is supporting Latvian production and exports, while the sharp swing in the current account balance suggests that the country’s ‘internal devaluation’ is working."
The IMF concluded the First Post-Program Monitoring Discussions with the
