Latvia: Economy remains solid in 2012
March 11, 2013
In the fourth quarter, GDP increased 5.1% over the same period the previous year, according to revised data published by the statistical office on 11 March. The quarterly print matched the initial figure reported in the flash estimate and followed the 5.2% expansion observed in the third quarter. In the full year 2012, the economy grew 5.6%, which virtually matched the 5.5% increase observed in 2011.
The fourth quarter expansion reflected healthy growth in private consumption, which grew 4.2% (Q3 2012: +5.1% year-on-year), while government spending contracted 0.2%, which, nonetheless, represented an improvement compared to the 1.7% drop recorded in Q3. Moreover, fixed investment accelerated from a 2.0% increase in Q3 to a 4.2% expansion in Q4.
On the external front, exports of goods and services increased 8.4% in the fourth quarter, faster than the 7.0% rise tallied in the previous three-month period. Imports swung from a 1.3% contraction in Q3 to a 1.0% expansion in Q4. As a result, the external sector's net contribution to overall economic growth dropped slightly from 4.8 percentage points in Q3 to 4.0 percentage points in Q4.
A quarter-on-quarter comparison corroborates the strong growth suggested by the annual figures, as GDP rose 1.4% in seasonally adjusted terms in Q4, following the 1.7% expansion observed in Q3.
In its January Macroeconomic Developments Report, the Central Bank expects the economy to expand 3.6% this year. FocusEconomics Consensus Forecast panellists are less optimistic than the Bank and expect the economy to grow 3.3% this year, which is up 0.4 percentage points over the previous month's projection. For 2014, panellists see economic growth picking up to 3.9%.
Author: Ricardo Aceves, Senior Economist