Latvia: Economy contracts at softer clip in Q3
October 30, 2020
Economic activity tumbled for the third consecutive quarter in Q3, with GDP falling 3.1% on an annual basis according to preliminary national accounts data released by Latvia’s Statistical Institute on 30 October. That said, the contraction was softer than the 8.9% plunge recorded in Q2, which had marked the worst downturn in over a decade. Meanwhile, GDP expanded 6.6% quarter-on-quarter in seasonally-adjusted terms in Q3, rebounding strongly from the record 7.1% slump in Q2.
Q3’s pullback was mainly driven by faltering activity in the services segment of the economy. Notably, however, the retail trade sector expanded solidly as Covid-19 restrictions were gradually loosened. Moreover, the producing sectors also saw output grow, cushioning the downturn to some extent.
The Covid-19 outbreak and associated containment measures will pummel activity this year. Next year, however, output is expected to rebound in line with a recovery in domestic spending and external demand. That said, key risks to the outlook still abound, particularly the latest resurgence of infections, which prompted a tightening of some restrictions.
Author: Javier Colato, Economist