Latvia: GDP drops at a slower pace in Q4
GDP fell at a softer pace of 0.5% year on year in the fourth quarter, following the 0.7% decline posted in the third quarter. On a seasonally adjusted quarter-on-quarter basis, economic activity growth strengthened to 0.4% in Q4, up from the 0.2% rise logged in Q3. Q4’s reading marked the best result since Q4 2022.
According to preliminary estimates, the fourth quarter’s smaller contraction stemmed from a rebound in the producing sectors of the economy, which mitigated weaker services sector activity. Meanwhile, the external sector likely remained in the doldrums in Q4: The downturn in goods exports eased only slightly in October–December compared to Q3.
Analysts at the EIU commented on the outlook:
“A continued tight labour market will ensure a recovery in domestic demand, with key energy support measures set to remain in place. Economic sentiment will continue to improve, with easing global supply chains and wider availability of semiconductor chips supporting the industrial sector. A wider rebound in external demand from Europe in the latter quarters of 2024 will boost the Latvian economy. Steady disbursement of EU funds will support government spending and investment projects, while the easing of ECB interest rates from the second half of 2024 will further support loan demand and credit expansion.”