Latvia GDP


Economy expands at fastest pace in three years

According to revised numbers published on 11 March, GDP expanded 3.6% annually in the fourth quarter, which was below the preliminary 3.7% estimate released on 9 February. That said, the quarterly reading was above the 2.9% expansion observed in the third quarter and represented the second consecutive quarter of improving economic activity. Moreover, the reading marked the fastest pace since the final quarter of 2007. A quarter-on-quarter comparison, confirms the positive result suggested by the annual figures, as GDP expanded 1.1% in the fourth quarter in seasonally adjusted terms. The acceleration in the fourth quarter was primarily driven by a faster expansion in private consumption, which accelerated from a 2.9% year-on-year increase in the third quarter to a 5.2% expansion in the fourth quarter. Furthermore, inventories were depleted at a slower rate and contributed 4.0 percentage points to overall growth, whereas gross fixed investment contracted 1.8% in the final quarter of 2010 (Q3: +0.3% year-on-year). Moreover, the net contribution from the external sector to overall economic growth deteriorated compared to the previous quarter. Exports of goods and services expanded 13.8% in the fourth quarter, slower than the 15.5% increase in the third, while imports increased 16.7%, faster than the 12.8% expansion tallied in the third quarter. Consequently, the net contribution from the external sector to overall growth fell from plus 0.7 percentage points in the third quarter to minus 1.6 percentage points in the fourth. At the sector level, the acceleration in the fourth quarter reflected a pick-up in agriculture and services. The industrial sector continued to register healthy growth in the fourth quarter but at a slower pace than in the third quarter. More recent economic information points to a deceleration in the recovery process. In January, industrial production expanded 6.5% over the same month last year, less than half the revised 16.6% increase observed in December (previously reported: +15.7% year-on-year). In its January macroeconomic report, the Central Bank anticipates the economy to expand 3.3% this year.

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