Latvia: GDP drops at a quicker pace in Q1
April 29, 2021
GDP fell 2.2% on an annual basis in the first quarter of 2021, according to a preliminary release. The result followed the 1.5% decline recorded in Q4 2020 and marked the fifth consecutive quarter of contracting output. Meanwhile, GDP contracted 2.6% in seasonally-adjusted quarter-on-quarter terms in Q1, swinging from the 1.1% increase in Q4.
The first quarter’s deterioration was mainly driven by shrinking services activity amid persistent Covid-19-related containment measures, which likely hampered consumption. Moreover, the industrial sector also saw output contract in the quarter, contrasting Q4’s result and thus weighing further on the overall downturn.
GDP is expected to recover from the Covid-19 fallout later this year as restrictions at home and abroad are lifted and activity rebounds. The external sector is set to benefit from reviving foreign demand, while household consumption and business investment are likely to grow strongly. That said, still-elevated cases and the uncertain evolution of the pandemic cloud the outlook.