Latvia: Revised GDP data confirm stabilization in Q2, sequential data suggest improvement
August 31, 2016
In the second quarter, Latvia’s economy increased 2.1% year-on-year, according to a revised set of data released by the Statistical Institute on 31 August. The reading matched the preliminary estimate and also the growth rate registered in Q2.
Looking at the GDP components, private consumption continued to support economic growth, while a further plunge in fixed investment was a drag on growth. Fixed investment plummeted 26.2% annually in Q2 (Q1: -15.7% year-on-year), which marked the sharpest contraction in six years. Meanwhile, private consumption accelerated from a 3.2% increase in Q1 to a 4.1% expansion in Q2—the strongest growth in household spending since Q3 2015. Conversely, government consumption decelerated from a 2.2% increase in Q1 to nil growth in Q2.
On the external side of the economy, although exports of goods and services rebounded and increased a healthy 3.8% in Q2 (Q1: -1.9% yoy), imports picked up substantial momentum and increased a solid 6.7% in Q2 (Q1: +5.2% yoy). As a result, net exports continued to drag on overall economic growth, reducing it by 1.9 percentage points in Q2, which followed the 4.6 detraction recorded in Q1.
Revised data that exclude seasonal factors were more encouraging about the state of the economy. GDP increased a revised 0.6% over the previous quarter in Q2, which was an improvement compared to the initial 0.4% expansion released in the preliminary estimate. This was also a substantial improvement compared to the 0.1% decrease registered in Q2, suggesting that the economy has moved out of technical recession.
Author: Ricardo Aceves, Senior Economist