Latvia's troubled economy shrank 4.6 percent last year, the government statistics agency said Wednesday, a sharp reversal after three years of double-digit growth in the Baltic state.
The agency also said that Latvia's economy, the worst in the 27-member European Union, contracted 10.3 percent in the fourth quarter of 2008, slightly revised from an earlier estimate of 10.5 percent.
In the fourth quarter, trade plummeted 17.2 percent, while financial services sank 18 percent, according to the agency.
The data confirm that Latvia has entered a deep recession, if not a full-blown depression _ which many economists define as a 10 percent drop in gross domestic product.
The country's Finance Ministry has forecast that the economy could shrink as much as 12 percent this year.
Standard & Poor's, a major credit rating agency, has downgraded Latvia's debt to the level of junk, and some economists speculate that Latvia may have to devalue its currency to regain a competitive edge for its exports.
Latvian government and central bank officials, however, reject any possibility of a devaluation, claiming it will only worsen the country's problems.
Meanwhile, Latvia's prime ministerial candidate, Valdis Dombrovskis, is working furiously to slash budget expenditures given that the 2008 budget was compiled with a 5 percent fall in GDP.
In December, international lenders such as the International Monetary Fund and the Scandinavian countries agreed to extend Latvia