Latvia: Q4 GDP expansion faster than previously reported
March 1, 2017
In Q4, Latvia’s GDP increased 2.6% over the same period last year, according to a revised set of data released by the Statistical Institute on 1 March. The increase was revised up from the initial flash estimate that saw the economy growing 2.1%. Q4’s result marked the fastest increase in a year and a substantial acceleration compared to the 0.5% year-on-year expansion in Q2. Sequential data was also encouraging as GDP increased a seasonally-adjusted 1.1% in Q4, the fastest pace since June 2015. Q4’s final result was also revised up from a preliminary 0.8% increase.
Looking at the GDP components, total consumption was the main driver behind the quarterly acceleration. Government consumption picked up from a 1.7% increase in Q3 to a 4.9% expansion in Q4—the fastest pace since Q1 2013. Likewise, private consumption growth accelerated to 3.3% in Q4 (Q3: +3.1% year-on-year). On a less positive note, the disruption in inflows of EU structural funds continues to hurt gross fixed investment which dropped for a sixth consecutive quarter (Q4: -5.5% yoy, Q3:-12.2% yoy).
On the external front, exports of goods and services increased for a third consecutive period, showing a solid 3.9% expansion in Q4 (Q3: +3.1% yoy).However, due to stronger domestic demand, imports accelerated and increased 4.1% in Q4, which came in well above the 1.2% rise in Q3. As a result, net exports were a drag on overall economic growth, subtracting 0.1 percentage points from it, which contrasted the 1.1 percentage point contribution recorded in Q3.
Author: Luis Lopez Vivas, Economist