Latvia Economic Forecast

Latvia Economic Outlook

November 21, 2017

Latvia’s economy gained traction in Q3, boosted by a stellar performance in the industrial and construction sectors. Moreover, in the same quarter the employment rate increased to the highest level in two decades, bringing down unemployment. This, together with robust wage hikes, translated into solid consumer spending, as suggested by data on retail sales. Continuing the trend, in October the unemployment rate remained at a multi-year low. In Q3, external demand also remained buoyant, spurred by rising overseas orders from the EU and CIS countries. Nevertheless, import growth outpaced exports, as strong fixed investment on the back of rising inflows of EU fund led to surging demand for capital equipment. The government’s prudent fiscal stance and declining public debt should further support growth and macroeconomic stability.

Latvia Economic Growth

The country is set to record another year of outstanding economic growth in 2018. Tighter labor market conditions and rapidly rising wages will likely further boost household consumption, while solid external demand and higher EU funds should underpin fixed investment growth. Moreover, healthy fiscal parameters shield the country against possible downturns. Nevertheless, the prevalence of short-term external debt in the banking sector poses some risks to stability. FocusEconomics panelists expect GDP to increase 3.7% in 2018, up 0.1 percentage points from last month’s forecast, and 3.4% in 2019.

Latvia Economy Data

20122013201420152016
Population (million)2.02.02.02.02.0
GDP per capita (EUR)10,70211,20311,81012,27012,707
GDP (EUR bn)21.922.723.624.425.0
Economic Growth (GDP, annual variation in %)4.02.62.12.72.0
Consumption (annual variation in %)3.15.01.33.53.4
Investment (annual variation in %)14.4-6.00.1-1.8-11.7
Industrial Production (annual variation in %)6.2-0.4-1.03.65.4
Retail Sales (annual variation in %)7.33.83.54.92.5
Unemployment Rate14.911.910.99.99.7
Fiscal Balance (% of GDP)-1.0-1.0-1.6-1.30.0
Public Debt (% of GDP)41.239.040.936.540.1
Money (annual variation in %)10.98.011.813.97.4
Inflation Rate (CPI, annual variation in %, eop)1.6-0.40.20.32.2
Inflation Rate (HICP, annual variation in %)2.30.00.70.20.1
Inflation (PPI, annual variation in %)3.71.50.4-0.9-2.4
Policy Interest Rate (%)0.750.250.05-  -  
Stock Market (annual variation in %)6.716.2-11.345.723.5
Exchange Rate (vs USD)1.321.381.21-  -  
Exchange Rate (vs USD, aop)1.291.331.33-  -  
Current Account (% of GDP)-3.6-2.7-2.0-0.81.5
Current Account Balance (EUR bn)-0.8-0.6-0.5-0.20.4
Trade Balance (EUR billion)-2.6-2.6-2.4-2.1-1.9
Exports (EUR billion)9.910.010.210.410.4
Imports (EUR billion)12.512.612.712.512.3
Exports (annual variation in %)15.71.52.31.10.0
Imports (annual variation in %)13.91.00.2-1.3-1.7
International Reserves (EUR)5.75.82.73.23.3
External Debt (% of GDP)138135143142147

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Latvia Facts

ValueChangeDate
Bond Yield0.550.0 %Jun 30
Exchange Rate1.180.65 %Dec 06
Stock Market1,0270.17 %Dec 06

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