Abstract-This paper can help decision makers to identify the regions with the largest need for stimulating their development. It offers ideas how to compare municipalities and how to search for common factors that influence development. Data from Latvia are used as an example of this method. It shows how cluster analysis can be applied for comparing socio-economic development of different municipalities and confirms the hypothesis that one of the characteristics common for municipalities with similar measures describing development is their geographical location.Index Terms-Cluster analysis, municipalities, regional development.

Sustainable economic development is based on the favourable and stable business environment that promotes competitiveness of companies. Commercial banks facilitate the capital flow from the less efficient sectors of the economy and businesses to more competitive industries and enterprises. The purpose of the research is to analyze the dynamics of the Baltic States' GDPs during years 2005-2010 and to test the GDP correlation with the loans issued by domestic commercial banks to the businesses. The key results of the analysis provide evidence about the mutual relations between the leading and influencing factors in GDP and issued loans and serve as a basis for developing proposals on fostering the recovery of Baltic States' economies. The Granger test analysis performed for the aggregate GDP and lending, as well as for six industries, provides controversial results and indicates that output in some industries has mutual relationship with the availability of financial resources, however the business sector development leads to the increase of credit granting thus ensuring the development of the sector. The methods applied in the research comprise the systematic, logical and comparative analysis, analysis of statistical data, expert method and generalization, as well as the econometric Granger causality test method.