Latvia: Contraction in GDP softens again in Q1
May 31, 2021
The economy shrank 1.3% year-on-year in the first quarter of 2021, according to detailed national accounts data released on 31 May. The reading showed a slight improvement from the 1.5% contraction logged in Q4 2020, and was also above the 2.2% downturn reported in the preliminary Q1 release. That said, the result still marked the fifth consecutive quarter of declining output.
Q1’s softer downturn was chiefly due to a milder decline in consumer spending (Q1: -7.3% yoy; Q4: -8.5%). On the other hand, the result was weighed on by deteriorating capital and public spending: Fixed investment fell 4.5% in Q1, contrasting the previous quarter’s 2.6% rise, while government consumption growth slowed slightly to 2.9% in the first quarter (Q4: +3.0% yoy).
Externally, exports of goods and services fell 1.0% year-on-year in Q1, swinging from the 3.0% increase logged in the previous quarter. Meanwhile, imports grew 0.3% annually, moderating from Q4’s 1.8% rise.
On a seasonally-adjusted quarter-on-quarter basis, GDP fell 1.7% in Q1 (Q4: +1.1% yoy).
GDP is set to recover from the pandemic’s impact this year, as demand revives both abroad and at home. That said, still-high Covid-19 infections and a relatively lagging vaccination campaign, coupled with concerns regarding the strength of the recovery in the Eurozone, cloud the outlook.