Latvia Economic Forecast

Latvia Economic Outlook

March 3, 2020

Growth slumped to an over three-year low in Q4 2019. This was mostly on the back of waning domestic demand as fixed investment contracted for the first time in three years and household spending growth slumped. Moreover, exports decelerated markedly in Q4, further weighing on the overall result. Turning to 2020, available data points to slightly healthier momentum in the first quarter. Economic sentiment edged up to an 11-month high and retail sales were upbeat in January, boding well for consumer demand at the outset of the year. External headwinds likely intensified, however, amid slowing global trade and the coronavirus fallout. Meanwhile, on 21 February, S&P Global Ratings upgraded Latvia’s credit rating to A+ from A, and kept a stable outlook, citing contained fiscal deficits and declining public debt.

Latvia Economic Growth

The economy is expected to gain some steam this year. Upbeat household spending—supported by a tight labor market, rising wages and relatively low inflation—is set to lead the upturn, with healthy fixed investment growth further supporting domestic demand. A volatile external environment is a major risk to the outlook, however. FocusEconomics panelists see GDP growing 2.6% in 2020, which is down 0.2 percentage points from last month’s forecast, and 2.7% in 2021.

Latvia Economy Data

2014 2015 2016 2017 2018
Population (million)2.02.02.02.01.9
GDP per capita (EUR)11,80312,29912,73413,74315,073
GDP (EUR bn)23.624.425.126.829.2
Economic Growth (GDP, annual variation in %)1.93.31.83.84.6
Consumption (annual variation in %)1.22.51.53.14.2
Investment (annual variation in %)0.1-1.2-8.211.315.8
Industrial Production (annual variation in %)-1.13.65.48.31.5
Retail Sales (annual variation in %)3.64.92.34.33.8
Unemployment Rate10.89.99.78.77.4
Fiscal Balance (% of GDP)-1.4-1.40.1-0.5-0.7
Public Debt (% of GDP)40.936.740.238.636.4
Money (annual variation in %)11.813.97.45.914.7
Inflation Rate (CPI, annual variation in %, eop)0.20.32.22.22.5
Inflation Rate (HICP, annual variation in %)0.70.20.12.92.6
Inflation (PPI, annual variation in %)0.4-0.9-2.42.64.5
Policy Interest Rate (%)-  -  -  -  -  
Stock Market (annual variation in %)-11.345.723.535.8-6.7
Exchange Rate (vs USD)-  -  -  -  -  
Exchange Rate (vs USD, aop)-  -  -  -  -  
Current Account (% of GDP)-1.7-0.91.41.0-0.7
Current Account Balance (EUR bn)-0.4-0.20.40.3-0.2
Trade Balance (EUR billion)-2.5-2.2-1.9-2.2-2.4
Exports (EUR billion)10.410.510.511.712.6
Imports (EUR billion)12.912.712.413.915.0
Exports (annual variation in %)3.61.00.610.87.9
Imports (annual variation in %)2.2-1.0-2.311.97.5
International Reserves (EUR)2.73.23.33.93.8
External Debt (% of GDP)143143149142122

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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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