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Latvia GDP Q3 2019

Latvia: Growth jumps in Q3 following Q2’s slowdown

GDP increased 2.9% in annual terms in the third quarter, according to a second estimate released on 29 November. This marked a significant acceleration from the second quarter’s 1.8% expansion, as well as a slight upward revision from the preliminary estimate of a 2.8% increase. Meanwhile, in seasonally- and working-day-adjusted quarter-on-quarter terms, growth remained broadly stable at 0.7% in Q3, compared to the 0.8% expansion logged in Q2.

The second quarter acceleration was broad-based. On the domestic front, household consumption growth firmed up to a near two-year high (Q3: +4.9% year-on-year; Q2: +3.7% yoy) amid stronger households’ purchasing power and a tighter labor market. Furthermore, fixed investment growth recovered somewhat from the second quarter’s downturn (Q3: +4.8% yoy; Q2: +2.7% yoy), chiefly on robust investment activity in the construction and IT sectors. Lastly, public spending strengthened in the third quarter (Q3: +3.2% yoy; Q2: +2.3% yoy), further supporting overall domestic demand.

In the external arena, dynamics were also more upbeat. Exports rebounded markedly in the third quarter (Q3: +5.6% yoy; Q2: -2.5% yoy), increasing at the fastest rate since Q2 2018 as both services and goods exports held up against slowing global and EU trade. On top of that, import growth slumped to a three-year low (Q3: +1.0% yoy; Q2: +4.5% yoy), chiefly on a shrinking inflow of services. As a result, the external sector’s contribution to overall growth improved considerably in the third quarter.

Looking ahead, economic growth is expected to remain broadly stable next year, powered by upbeat domestic demand. Sturdier private consumption is set to spearhead the overall expansion, buttressed by a tight labor market and lower inflation, while healthy investment activity should be sustained.

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