Latvia Economic Forecast

Latvia Economic Outlook

November 20, 2018

The economy lost some steam in Q3, although growth remained solid nonetheless. Weakness within the external sector drove the deceleration, with goods exports growth down markedly from Q2 amid a wider slowdown in EU trade. Dynamics in the domestic economy nevertheless remained healthy and appear to have led the overall third-quarter expansion. Labor market conditions continued to tighten throughout the quarter with the unemployment rate falling to a near 10-year low in September, and likely bolstering private consumption growth in turn. Intensifying inflationary pressures, however, seemingly capped household consumption gains somewhat in Q3, reflected in slowing retail sales growth in September. Meanwhile, Janis Bordans, the leader of the New Conservative Party, was nominated by President Raimonds Vejonis as the new prime minister on 7 November. Despite this, with coalition talks having reportedly stalled in recent days, another candidate will be chosen if Bordans fails form a new coalition government by the 21 November deadline set by the president.

Latvia Economic Growth

Growth is seen slowing next year due to weakness within the external sector amid cooling global trade and a deterioration in the general EU business environment. However, private consumption growth should remain robust in 2019, underpinned by higher household incomes—partly due to tax code reforms enacted this year—and the continued tightening in labor market conditions. FocusEconomics panelists see GDP increasing 3.4% in 2019, which is unchanged from last month’s forecast, and 3.1% in 2020.

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 Rate1.140.65 %Dec 12
Stock Market9650.17 %Dec 12

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