Latvia: Revised data lifts GDP growth in Q1 but still marks deceleration
May 31, 2016
In the first quarter, Latvia’s economy increased 2.1% year-on-year, according to a revised set of data released by the statistical office on 31 May. The reading was revised up from an early estimate that had GDP growing 1.8%, but, nonetheless, it still represented a deceleration compared to the 2.7% expansion registered in Q4.
Looking at the GDP components, private consumption government spending continued to support economic activity, while a plunge in fixed investment and a further drop in exports of goods and services dragged on growth. Fixed investment plummeted 16.4% annually in Q1 (Q4: +1.2% year-on-year), which marked the sharpest contraction in nearly six years. Conversely, private consumption accelerated from 2.4% increase in Q4 to a 3.7% expansion in Q1. Meanwhile, government consumption increased 2.2% in Q1, which followed a 2.0% rise in Q4.
Exports of goods and services decreased 2.9% in the first quarter, which came in below the 0.9% contraction tallied in Q4. On the other side of the balance, imports swung from a 1.3% drop in Q4 to a 4.6% expansion in Q1. As a result, the contribution from the external sector to overall economic growth deteriorated drastically from a 0.3 percentage-point contribution in Q4 to a massive 4.8 percentage-point detraction in Q1.
Revised data adjusted for seasonal factors showed that GDP increased 0.1% in Q1 over the previous quarter, which was an improvement compared to the initial 0.1% contraction released in the preliminary estimate. Q1’s result was also a substantial improvement compared to the 0.4% fall registered in Q4.
Author: Ricardo Aceves, Senior Economist