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Latvia GDP Q3 2023

Latvia: GDP slides at a slower pace in the third quarter

GDP slid at a softer pace of 0.7% year on year in the third quarter, above the 1.1% contraction tallied in the second quarter. The softer annual decline was underpinned by a smaller drop in private spending and stronger public consumption growth. On a seasonally adjusted quarter-on-quarter basis, economic activity rebounded, expanding 0.6% in Q3, contrasting the previous period’s 0.3% fall. Q3’s reading marked the best result since Q4 2022

Domestically, private consumption declined at a slower pace of 1.3% year on year in Q3, which marked the best reading since Q4 2022 (Q2: -2.0% yoy), with transport being the sole category that households increased their spending on year on year. Additionally, public spending picked up to a 7.7% increase in Q3 (Q2: +5.9% yoy). Less positively, fixed investment growth fell to 3.1% in Q3, marking the worst reading since Q4 2022 (Q2: +6.1% yoy).

On the external front, exports of goods and services fell 11.8% on an annual basis in the third quarter, which was below the second quarter’s 4.5% contraction. In addition, imports of goods and services contracted at a sharper pace of 8.3% in Q3 (Q2: -2.4% yoy), marking the worst reading since Q2 2020.

Analysts at the EIU commented on the outlook:

“Growth will rebound to 2.5% in 2024, as inflation abates, supporting private consumption. Real wage growth will strengthen household purchasing power, while a continuously tight labour market will provide steady 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.”

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