Latvia: GDP records sharpest contraction since Q1 2021 in the third quarter according to preliminary data
According to a preliminary reading, GDP dropped 0.6% year on year in the third quarter, contrasting with the 2.9% expansion seen in the second quarter. Q3’s reading marked the worst result since Q1 2021. A steeper decline in the primary and secondary sectors amid deteriorating operating conditions outweighed a robust expansion in the services sector. On a seasonally adjusted quarter-on-quarter basis, GDP declined 1.7% in Q3, contrasting the previous period’s 0.2% growth. Q3’s reading marked the sharpest sequential contraction in the EU this quarter. A detailed breakdown of the national accounts for the third quarter will be released on 30 November.
Looking ahead, the economy will be on the verge of a technical recession in Q4, as the country faces a winter energy crunch that will hit industrial output and consumer spending alike. With the third-highest inflation rate in the Eurozone in October, price pressures will continue to strain household budgets. Meanwhile, the prolongation of the Russia–Ukraine war looms over growth prospects via the loss of trade with Russia and Belarus.