Latvia: GDP falls at milder pace in Q4
February 1, 2021
GDP fell 1.4% on an annual basis in the last quarter of 2020, according to preliminary national accounts data released by Latvia’s Statistical Institute on 1 February. The result followed the 2.6% decline recorded in Q3 and marked the fourth consecutive quarter of contracting output. Meanwhile, GDP expanded 1.1% quarter-on-quarter in seasonally-adjusted terms in Q4, markedly below the 7.1% surge in Q3. For 2020 overall, GDP contracted an estimated 3.5%, contrasting 2.0% growth in 2019 and marking the sharpest downturn in a decade.
The fourth quarter’s pullback was mainly driven by shrinking services-sector activity amid the reintroduction of Covid-19 restrictions, which hampered consumption. Notably, however, the producing sectors saw output rise robustly in the quarter, partly cushioning the downturn.
The economy is projected to recover from the Covid-19 fallout this year as restrictions at home and abroad are lifted and activity resumes in turn. Consumer spending and business investment should rebound, while the external sector is set to benefit from reviving external demand. The recent resurgence in cases and difficulties in vaccine deployment, however, cloud the outlook.
Author: Javier Colato, Economist