By Marcin Grajewski
BRUSSELS, Jan 20 (Reuters) - Latvia's economy should start growing in 2011 after two years of recession and meet euro zone entry criteria in 2012 without having to devalue its currency before, its finance minister said on Tuesday.
Atis Slakteris told Reuters that the European Commission was realistic in forecasting this week that Latvia's gross domestic product would shrink by 6.9 percent this year, the biggest contraction in the 27-country EU, and by 2.4 percent in 2010.
"It is a realistic forecast, although a better outcome is not impossible. We believe a recovery will start in 2011," he said in an interview on the sidelines of a meeting of EU finance ministers.
The government had earlier predicted a contraction of about 5 percent for 2009.
Latvia is among the EU countries hardest hit by the global economic downturn, mainly due to its macroeconomic imbalances developed during years of fast growth fuelled by a credit boom, high private consumption and real estate investment.
Slakteris rejected any speculation his country might devalue its currency, abandoning a peg to the euro, a move some economists say might be a tool in restoring the country's competitiveness.
"Our position is very clear, we do not consider any changes to the current exchange rate. A change would not bring any positive results," he said, stressing that a lot of credit in Latvia was in euros.
He said Latvia would aim to meet in 2012 all criteria for joining the euro zone, which include keeping any budget deficit below 3 percent of GDP, sufficiently low inflation and long-term interest rates, and a stable currency.
"We should be able to fulfil the Maastricht criteria in 2012," he said.
This would mean Latvia could adopt the euro in 2013 at the earliest.
Asked when Latvia, a country of 2.3 million people, wanted to join the euro, Slakteris said: "As soon as possible."
He said Latvia would stick rigorously to a fiscal programme agreed with the International Monetary Fund.
The country, rocked by a riot in the capital Riga last week, was forced to call for IMF and EU help last year after its economy slid and budget revenues plummeted.
On Tuesday, EU finance ministers approved formally a 3.1 billion euro ($4 billion) loan for Latvia, part of a wider 7.5 billion euro IMF-led rescue. (Additional reporting by Patrick Lannin in Riga; editing by Dale Hudson)