Latvia skyline

Latvia Economic Forecast

Latvia Economic Outlook

The economy failed to live up to market expectations in Q3, posting a second consecutive year-on-year decline. Absent a detailed breakdown, the contraction was driven by a drop in services sector activity, as consumer sentiment remained pessimistic. In addition, merchandise exports shrank more in July–September than in Q2, pointing to a downbeat contribution from the external sector. More positively, the downturn in the producing sectors softened from Q2, supporting Q3’s smaller decline. In Q4, the economy should stage a modest recovery as cooling inflation outweighs pressure on domestic demand from elevated interest rates. In other news, in November, Parliament voted in favor of slashing mortgage rates for a year. The policy, which could be extended, should support the economy and the housing market but will likely dent bank profits.

Latvia Inflation

Inflation eased to 2.3% in October (September: 3.6%) on a sharper drop in transport prices and lower food price growth. Inflation should average less than a third of 2023’s rate in 2024, curbed by this year’s monetary policy tightening and lower commodity prices. Spikes in energy costs and stronger-than-expected domestic demand pose upside risks.

This chart displays Economic Growth (GDP, annual variation in %) for Latvia from 2013 to 2022.

Latvia Economic Data

2018 2019 2020 2021 2022
Population (million) 1.9 1.9 1.9 1.9 1.9
GDP (USD bn) 34.4 34.2 34.3 39.4 40.9
GDP per capita (USD) 17,785 17,823 17,990 20,825 21,779
GDP (EUR bn) 29.2 30.6 30.1 33.3 38.9
GDP per capita (EUR) 15,074 15,923 15,781 17,617 20,720
Economic Growth (Nominal GDP, ann. var. %) 8.0 4.9 -1.5 10.8 16.6
Economic Growth (GDP, ann. var. %) 4.0 0.6 -3.5 6.7 3.4
Domestic Demand (ann. var. %) 5.2 1.2 -4.3 10.9 4.4
Private Consumption (ann. var. %) 3.0 0.0 -4.3 7.3 6.0
Government Consumption (ann. var. %) 1.7 5.6 2.1 3.5 2.8
Fixed Investment (ann. var. %) 11.7 1.5 -2.2 7.2 0.6
Exports (G&S, ann. var. %) 4.4 1.3 0.4 9.0 10.3
Imports (G&S, ann. var. %) 6.3 2.2 -1.1 15.1 11.1
Industrial Production (ann. var. %) 2.0 0.8 -1.8 6.5 0.8
Retail Sales (ann. var. %) 3.8 2.3 1.5 2.5 4.6
Wages (ann. var. %) 8.4 7.2 6.2 11.8 7.5
Unemployment (% of active population, aop) 7.4 6.3 8.1 7.5 6.8
Fiscal Balance (% of GDP) -0.7 -0.5 -4.5 -7.2 -4.6
Public Debt (% of GDP) 37.0 36.7 42.2 44.0 41.0
Money (ann. var. of M2 %) 13.8 8.0 13.1 7.9 6.4
Inflation (CPI, ann. var. %, eop) 2.5 2.3 -0.5 7.8 20.9
Inflation (HICP, ann. var. %, eop) 2.5 2.1 -0.5 7.9 20.7
Inflation (HICP, ann. var. %, aop) 2.6 2.7 0.1 3.2 17.2
Inflation (PPI, ann. var. %, aop) 4.5 1.9 -1.9 13.2 30.7
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 2.50
ECB Overnight Deposit Rate (%, eop) -0.40 -0.50 -0.50 -0.50 2.00
3-Month EURIBOR (%, eop) -0.31 -0.38 -0.55 -0.57 2.13
10-Year Bond Yield (%, eop) 1.05 0.16 -0.29 0.30 3.50
Stock Market (var. of OMXR %) -6.7 10.7 10.4 12.1 -9.5
Exchange Rate (USD per EUR, eop) 1.14 1.12 1.22 1.14 1.07
Exchange Rate (USD per EUR, aop) 1.18 1.12 1.14 1.18 1.05
Current Account Balance (EUR bn) -0.1 -0.2 0.9 -1.3 -1.8
Current Account Balance (% of GDP) -0.2 -0.6 2.9 -3.9 -4.7
Merchandise Trade Balance (EUR bn) -2.5 -2.6 -1.5 -2.8 -4.1
Merchandise Exports (EUR bn) 12.6 12.8 13.4 16.2 20.7
Merchandise Imports (EUR bn) 15.1 15.4 15.0 19.0 24.8
Merchandise Exports (ann. var. %) 8.3 1.4 5.4 20.6 27.9
Merchandise Imports (ann. var. %) 7.2 2.1 -2.6 26.5 30.9
Foreign Direct Investment (EUR bn) 0.8 0.8 0.8 2.9 1.4

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