Latvia Economic Forecast

Latvia Economic Outlook

September 28, 2021

Economic growth soared to a 14-year high in annual terms in the second quarter: Strong rebounds in both private and capital spending, as well as quicker government consumption growth, were behind the result. That said, a low base effect assisted the overall figures, as Q2 2020 saw an equally steep contraction. Turning to Q3, available data points to a potential slowdown: Retail sales rose at a notably slower pace than Q2’s average in July, which, combined with deteriorating consumer confidence in July–August, suggests weaker household consumption. In other news, on 3 September Fitch Ratings affirmed the country’s “A-” credit rating with a stable outlook, citing economic resilience and the benefits of EU membership. Lastly, on 10 September the country received EUR 237 million as the first tranche of its allocated funds under the EU’s recovery spending, boding well for activity ahead.

Latvia Economic Growth

The economy is set to rebound this year on the back of firmer household spending and reviving external demand, before gaining further momentum in 2022: As the effects of the pandemic ease, pent-up demand is expected to drive growth. That said, recent regional tensions with neighboring Belarus and a possible reinstatement of Covid-19 restrictions pose risks to the outlook. FocusEconomics panelists project GDP to grow 3.9% in 2021 and 4.9% in 2022, which is down 0.2 percentage points from last month’s forecast.

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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