Latvia Economic Forecast

Latvia Economic Outlook

June 2, 2020

The economic panorama is darkening further in Q2, after the economy shrank for the first time in nearly a decade in Q1. Plunging consumer demand chiefly drove the first-quarter contraction, with household consumption contracting at the sharpest rate in over 10 years amid constraining effects of Covid-19. Turning to Q2, business sentiment plunged to an over 10-year low in April and slipped further in May, signaling that private sector activity will have contracted sharply in the quarter. Similarly, restrictions to contain Covid-19 likely curtailed consumer spending in April–May, as unemployment likely soared, while collapsing external demand continued to hinder exports. More positively, however, authorities have been gradually easing restrictions since early May which should give the economy some much-needed respite at the end of Q2.

Latvia Economic Growth

The economy is expected to shrink substantially this year, as Covid-19 wreaks havoc on domestic demand and dampens external demand. Contracting fixed investment and a plunge in household consumption are set to spearhead the overall downturn, although sturdier public spending, amid the government’s support measures, should soften the blow. FocusEconomics panelists see GDP contracting 6.6% in 2020, which is up 0.6 percentage points from last month’s forecast. In 2021, the economy is expected to rebound and grow 5.3%.

Latvia Economy Data

2015 2016 2017 2018 2019
Population (million)2.02.02.01.91.9
GDP per capita (EUR)12,29912,73413,74315,073-  
GDP (EUR bn)24.425.126.829.2-  
Economic Growth (GDP, annual variation in %)3.31.83.84.62.1
Consumption (annual variation in %)2.51.53.14.2-  
Investment (annual variation in %)-1.2-8.211.315.8-  
Industrial Production (annual variation in %)3.65.48.31.51.0
Retail Sales (annual variation in %)4.92.34.33.82.4
Unemployment Rate9.99.78.77.46.4
Fiscal Balance (% of GDP)-1.40.1-0.5-0.7-  
Public Debt (% of GDP)36.740.238.636.4-  
Money (annual variation in %)13.97.45.914.7-  
Inflation Rate (CPI, annual variation in %, eop)0.32.22.22.5-  
Inflation Rate (HICP, annual variation in %)0.20.12.92.62.8
Inflation (PPI, annual variation in %)-0.9-2.42.64.51.9
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-  
Current Account Balance (EUR bn)-0.20.40.3-0.2-  
Trade Balance (EUR billion)-2.2-1.9-2.2-2.4-  
Exports (EUR billion)10.510.511.712.6-  
Imports (EUR billion)12.712.413.915.0-  
Exports (annual variation in %)1.00.610.87.9-  
Imports (annual variation in %)-1.0-2.311.97.5-  
International Reserves (EUR)3.23.33.93.84.0
External Debt (% of GDP)143149142122-  

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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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