. bank lending increased, acting as the engine for economic growth. total loans increased by 52 % in 1998 and by 15. 3 % in 1999, and 95 % of all loans have been directed at the private sector. credit growth has been accompanied by a gradual shift from short - term trade finance to increased lending directed towards the productive sector of the economy. in february 2000, the share of loans with a maturity of more than 5 years amounted to 16. 8 %, while at the end of 1998 the respective figure was 13 %. increased public confidence in the banking sector is also indicated by a 6. 3 % growth in residents ’ deposits in 1999. long - term deposits ( over 12 months ) grew by 82 % in 1999, thus exceeding the pre - russian crisis level. positive trends can be observed in other latvian financial markets as well. after the share prices fell during the aftermath of the russian crisis in 1998, the stock market has rebounded : in january 2000, the stock market index in latvia exceeded the 100 mark for the first time since the russian crisis. in the first three months of this year, the dow jones riga stock exchange index increased by 33 %. in 2000, the market for government securities has become both wider and deeper, as 3 - year government bonds were successfully launched in the domestic market for the first time in january, followed by 5 - year bonds in march. the share of government bonds with a maturity of 1 year or more amounts to 86. 5 % of all government securities. the development of yields on government bonds issued in international markets also shows increasing confidence in the economic policies of latvian authorities. the spreads on 5 - year eurobonds in the secondary market narrowed from 330 basis points at the beginning of may last year to 148 basis points in february of this year. a balanced central government budget for 1999 had been adopted originally. strict fiscal policy enabled the government to use the budget as an automatic stabiliser in the aftermath of the russian crisis and allow the budget deficit to grow up to 4 % of gdp in 1999. however, it is important to stress that this is considered an extraordinary one - time measure. the government has expressed strong intentions to reduce the deficit to 2 % of gdp in 2000, with a balanced budget remaining the target for 2001. as a result of these policies, all of which received public support, the unemployment rate dropped from 10. 1 % in march 1998 to 9 % in march this year, and real gdp development after a 3.

ventspils port decreased, while the other ports of latvia performed well. vibrant economic activity allows us to project that gdp growth will be higher in the latter half of 2002 ( 5. 5 % - 5. 7 % ) than it was in the first half of the year ; and therefore, real gdp is expected to grow by 5 % in 2002. the year - on - year growth of 10. 0 % in latvia's exports that was observed in the first nine months of 2002 despite weak global economic growth should be noted as a positive development. in the country breakdown, exports grew in all groups, with most rapid growth reported in exports to the united states, sweden, russia and lithuania. exports to the principal trading partner, the european union, rose 6. 9 %. the principal contributors to the growth were exports of prepared foodstuffs, wood, furniture, machinery and mechanical appliances, electrical equipment, and base metals and articles of base metals. with domestic demand remaining high, imports were up by 12. 6 %. as latvia's exports rose more markedly, deficit in the balance of payments current account decreased substantially in july and august. in september, the current account deficit increased again, as imports of goods rose. in the first nine months of 2002, the services surplus was 12. 0 million lats higher than the year before. the increase in the services surplus resulted from rising exports of travel and other services and lower imports of other services. the transportation services surplus declined largely because of a low cargo turnover at the ventspils port. in the first nine months of 2002, the services surplus covered 40. 5 % of the goods deficit. the current account deficit continued to be adequately covered with foreign direct investment ( in the amount of 75. 5 % in the first nine months of 2002 ). if the external and internal economic environment does not deteriorate at the end of the year, the current account deficit for 2002 is likely to remain at 8. 5 % of gdp. the country's fiscal position was still better than the year before. in the first nine months of 2002, fiscal deficit in the general government consolidated budget was 19. 8 million lats ( 2. 2 times higher than the year before, when the deficit amounted to 43. 6 million lats ). the general government consolidated budget was affected by an increase in the local government consolidated budget fiscal deficit, which amounted to 20. 3 million lats. nevertheless, according to the preliminary data released by