Latvia: Economic growth moderates more than previously estimated
May 29, 2015
According to revised data published by the National Statistics Office, GDP increased 1.9% over the same quarter of the previous year. The reading represented a mild deceleration compared to the 2.1% expansion registered in the fourth quarter of 2014 and was revised down from the 2.0% rise registered in a preliminary estimate. In addition, the figure marked the slowest pace of growth since Q1 2011.
Slowing domestic demand was the main driver behind Q1’s deceleration. Government consumption increased 3.4% in Q1, which was slightly below the 3.8% rise in Q4. In addition, gross fixed investment deteriorated, falling 0.9% in Q1, which was below the 0.6% contraction recorded in Q4. In contrast, private consumption picked up expanding 2.6% in Q1 (Q4 2014: +2.2% year-on-year).
In the external sector, exports of goods and services increased 2.7% year-on-year in Q1, which came in below the 3.3% rise observed in Q4. Imports swung from a 2.8% expansion in Q4 to a 1.8% contraction in Q1. As the deterioration in imports outpaced that of exports, the net contribution from the external sector to overall economic growth improved noticeably and rose from plus 0.2 percentage points in Q4 to plus 2.8 percentage points in Q1.
A sequential comparison corroborates the slowdown for the Latvian economy suggested by the annual data. GDP increased a seasonally-adjusted 0.3% in Q1 over the previous quarter, which came in below the 0.5% expansion observed in Q4. Q1’s result was revised down from a previous estimate that had GDP rising 0.4%.
Author: Ricardo Aceves, Senior Economist