Latvia Economic Forecast

Latvia Economic Outlook

June 26, 2018

Economic momentum held up at the start of 2018: The economy expanded robustly in the first quarter, nearly matching the previous quarter’s result. Strong domestic dynamics led the expansion in Q1, propelled by another double-digit expansion in fixed investment, which has benefited from an influx of EU funding. In addition, household consumption growth remained elevated, likely supported by the sustained tightening of labor market conditions; it was complimented by a robust increase in government spending. Meanwhile, sluggish export growth undermined the external sector’s performance in the quarter, with exports plummeting to the lowest level since Q4 2015, amid the broader trade slowdown across the EU. On the political front, on 18 June, Latvia’s anticorruption body asked prosecutors to press charges against Central Bank Governor Ilmars Rimsevics, who has been suspended since February amid bribery allegations.

Latvia Economic Growth

The short-term outlook for the economy remains bright, underscored by robust domestic demand, which should drive the economy in 2018 on the back of soaring fixed investment and sustained private consumption growth. Nevertheless, a weakening external sector, coupled with a marked cooling in financial sector activity in the face of the ongoing corruption scandal, signals headwinds for growth, which is expected to slow this year. FocusEconomics panelists see GDP increasing 3.7% in 2018, which is unchanged from last month’s forecast, and 3.4% in 2019.

Latvia Economy Data

20132014201520162017
Population (million)2.02.02.02.02.0
GDP per capita (EUR)11,25811,80312,24612,65913,773
GDP (EUR bn)22.823.624.324.926.9
Economic Growth (GDP, annual variation in %)2.41.93.02.24.5
Consumption (annual variation in %)5.11.42.53.35.1
Investment (annual variation in %)-6.00.1-0.5-15.016.0
Industrial Production (annual variation in %)-0.9-1.13.65.48.5
Retail Sales (annual variation in %)3.83.64.92.34.3
Unemployment Rate11.910.99.99.78.7
Fiscal Balance (% of GDP)-1.2-1.5-1.40.1-0.5
Public Debt (% of GDP)39.040.936.840.540.1
Money (annual variation in %)8.011.813.97.45.9
Inflation Rate (CPI, annual variation in %, eop)-0.40.20.32.22.2
Inflation Rate (HICP, annual variation in %)0.00.70.20.12.9
Inflation (PPI, annual variation in %)1.50.4-0.9-2.42.6
Policy Interest Rate (%)0.250.050.050.00.0
Stock Market (annual variation in %)16.2-11.345.723.535.8
Exchange Rate (vs USD)1.381.211.091.051.20
Exchange Rate (vs USD, aop)1.331.331.111.111.13
Current Account (% of GDP)-2.7-2.0-0.81.5-0.9
Current Account Balance (EUR bn)-0.6-0.5-0.20.4-0.2
Trade Balance (EUR billion)-2.6-2.4-2.1-1.9-2.6
Exports (EUR billion)10.010.210.410.411.4
Imports (EUR billion)12.612.712.512.214.0
Exports (annual variation in %)1.52.31.1-0.110.0
Imports (annual variation in %)1.00.2-1.3-1.914.5
International Reserves (EUR)5.82.73.23.33.9
External Debt (% of GDP)134143142148141

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Latvia Facts

ValueChangeDate
Bond Yield0.550.0 %Jun 30
Exchange Rate1.170.65 %Jul 13
Stock Market1,0460.17 %Jul 13

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