Latvia Economic Forecast

Latvia Economic Outlook

January 30, 2018

After logging an impressive growth rate in Q3, the economy appears to have moderated in the final quarter of 2017, while still growing at a healthy pace. Year-on-year growth in retail sales accelerated for the second consecutive month in November, suggesting that private consumption continued to benefit from a tight labor market and rapidly growing wages. External demand also remained buoyant, with exports jumping from the previous year in both October and November. However, import growth decelerated considerably in both months. Further signs of a possible slowdown in the domestic economy came from the industrial sector: Annual growth in industrial production lost considerable steam in the first two months of the fourth quarter. That said, encouraging signs came from the construction sector as confidence continued to improve in seasonally-adjusted terms in Q4. Furthermore, the construction output surged by a fourth in Q3 over the same quarter of 2016.

Latvia Economic Growth

This year growth is expected to moderate compared to 2017, but should nevertheless remain solid. Continued wage growth and a further tightening of labor market conditions will underpin household spending, while fixed investment will benefit from inflows of EU funds. Healthy growth and a prudent fiscal stance will, moreover, maintain the debt ratio on a downward path. A possible deterioration in relations with Russia could, however, lead to some financial instability, given the high proportion of foreign-held bank deposits. FocusEconomics panelists expect GDP to increase 3.8% in 2018, up 0.1 percentage points from last month’s forecast, and 3.3% 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 Rate1.240.65 %Feb 19
Stock Market1,0230.17 %Feb 19

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