A screenshot from one of the Latvian Tourism Development Agency's “You Won’t Believe it Until You See It!" advertisements.

A few years ago the Latvian Tourism Development Agency ran a promotional campaign called “You Won’t Believe it Until You See It!” which talked about such things as blue cows, flying people and extraordinary singers. If that campaign were still up and running today, the number one topic would no doubt be the turn-around of the Latvian economy.

But don’t take my word for it. EU Economic and Monetary Affairs Commissioner Olli Rehn said as much when the EU member states approved the latest tranche in loans to the Latvian government: “The program is on track, financial conditions have largely stabilized and the economic situation is showing signs of improvement.”

Yesterday in an analysis of the International Monetary Fund, Martin Hutchinson wrote in Sify Finance: “Nor is the IMF’s track record by any means perfect. On the positive side, its loans to Latvia appear to have had the desired effect in encouraging the government’s austerity program, allowing Latvia to maintain its exchange rate parity and to generate the beginnings of economic recovery. Industrial production, for instance, rose 10.9 percent in the year to May.”

The Bank of Latvia President Ilmārs Rimšēvičs agrees. He points out that Latvia’s growing current account surplus “…confirms the assumption that the lowest point in the economic decline is already in the past, which is vital both for the real economy and psychologically. We expect positive GDP growth also in the second quarter as suggested by the results in May, and the manufacturing industry will make the greatest contribution to positive growth.”

The BBC is equally positive in its outlook for the Latvian economy. In a country-by-country review of “The Eurozone in Crisis”, the BBC passed the following “verdict” on Latvia:

• Experienced one of EU’s deepest recessions, but confidence is returning;
• Fiscal measures having encouraging impact, but still much work ahead;
• Exports now expected to grow at healthy pace;
• Property market recovering and consumer spending growing;
• But fragile economy could still be hit by any threat to confidence.

Pēteris Strautiņš, an economic expert for DnB NORD bank, describes what happened from an insider’s point of view: “Almost everything that was fragile in our economy has been broken, and the explosive potential that accrued during the beginning of the crisis has already exploded. Now the rubble is being cleared and things are turning forward.” Strautiņš agrees with other more optimistically inclined observers that the Latvian economic recovery „will be slow, but steady”.

Actually there’s a lot of good news coming out of Latvia these days. Latvia’s national airline airBaltic just announced that that it carried 1.472 million passengers during the first six months of 2010 at a 22% rise from the same period a year ago. Many of those passengers may be flocking to our beaches, because Latvia has been experiencing a record high heat wave in July, and more unbelievably hot Nordic weather is expected through August.

Economic recovery is a product of many complex factors, including perceptions, regardless of whether they are all true or not. Latvia’s sudden popularity is evident in a very hot new ad campaign by Old Spice, where the “Old Spice Guy” boasts that his products are so popular in eastern Latvia “that they made me king”.  He adds ”that’s great, because I love grapes”. And if you don’t believe me, watch it below.

Like the improving economy, the blue cows and flying people are really real, although I hope those airBaltic passengers don’t start coming here for the grapes.

Ojārs Kalniņš is the director of the Latvian Institute. The Latvian Institute (Latvijas institūts) was established by the Latvian state to provide a wide range of information about Latvia, its society, culture and history. For more information visit www.li.lv.

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Views expressed in the opinion section are never those of the Baltic Reports company or the website’s editorial team as a whole, but merely those of the individual writer.