Latvia Economic Forecast

Latvia Economic Outlook

September 1, 2020

GDP contracted at the sharpest pace in over a decade in Q2, as Covid-19-related restrictions and eviscerated foreign demand dented the producing sectors while social distancing measures hammered the services sector. Household spending seemingly slumped in Q2 amid deteriorating labor market conditions and widespread closures of non-essential businesses, while fixed investment likely dived on sinking confidence and elevated uncertainty. Turning to Q3, the economic recovery seems to be underway after the State of Emergency was lifted in early June. Economic sentiment rose to a five-month high in August, while the unemployment rate stabilized in July. Moreover, retail sales rose for the second month running in July. Less positively, although the country has successfully contained the outbreak at home, the impact of the pandemic continues to weigh on exports and tourist inflows.

Latvia Economic Growth

The economy is expected to contract markedly this year due to the Covid-19 pandemic. The external sector will reel from a collapse in tourist arrivals and hampered intra-EU trade, while plunging fixed investment and constrained private consumption are set to dampen domestic demand. Higher public spending and increased EU funding should cushion the downturn somewhat, however. FocusEconomics panelists project GDP to shrink 5.5% in 2020, which is up 1.1 percentage points from last month’s forecast. In 2021, the economy is expected to rebound and grow 4.8%.

Latvia Economy Data

2015 2016 2017 2018 2019
Population (million)2.02.02.01.91.9
GDP per capita (EUR)12,29912,73413,74315,02415,799
GDP (EUR bn)24.425.126.829.130.5
Economic Growth (GDP, annual variation in %)3.31.83.84.32.2
Consumption (annual variation in %)2.51.53.14.22.9
Investment (annual variation in %)-1.2-8.211.315.83.1
Industrial Production (annual variation in %)3.65.48.31.51.0
Retail Sales (annual variation in %)4.92.34.33.82.3
Unemployment Rate9.99.78.77.46.4
Fiscal Balance (% of GDP)-1.40.2-0.8-0.8-0.2
Public Debt (% of GDP)37.340.939.337.236.9
Money (annual variation in %)13.97.45.914.7-  
Inflation Rate (CPI, annual variation in %, eop)0.32.22.22.52.2
Inflation Rate (HICP, annual variation in %)0.20.12.92.62.8
Inflation (PPI, annual variation in %)-1.0-2.32.64.51.9
Policy Interest Rate (%)-  -  -  -  -  
Stock Market (annual variation in %)45.723.535.8-6.711.5
Exchange Rate (vs USD)-  -  -  -  -  
Exchange Rate (vs USD, aop)-  -  -  -  -  
Current Account (% of GDP)-0.91.41.0-0.7-0.5
Current Account Balance (EUR bn)-0.20.40.3-0.2-0.2
Trade Balance (EUR billion)-2.2-1.9-2.2-2.4-2.5
Exports (EUR billion)10.510.511.712.612.6
Imports (EUR billion)12.712.413.915.015.1
Exports (annual variation in %)1.00.610.87.90.2
Imports (annual variation in %)-1.0-2.311.97.51.1
International Reserves (EUR)3.23.33.93.84.0
External Debt (% of GDP)143149142123116

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Latvia Facts

Value Change Date
Bond Yield0.550.0 %Jun 30
Exchange Rate1.120.65 %Dec 31

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