GDP declines at a milder rate in Q4

Economy remains in decline in Q4: GDP contracted by 0.4% year on year in the fourth quarter, an improvement from the 1.0% contraction logged in the third quarter. On a seasonally adjusted quarter-on-quarter basis, economic activity flatlined in Q4, improving slightly from the previous quarter's 0.2% decrease and marking the best result since Q3 2023. In 2024 as a whole, the economy contracted 0.4%, in sharp contrast to 2023’s 2.9% rise.

Domestic momentum remains subdued: Household spending growth fell to 0.2% in Q4, marking the weakest expansion in a year (Q3: +0.9% yoy). Public spending growth was the slowest since Q2 2023, expanding 6.1% (Q3: +7.7% yoy). Moreover, fixed investment contracted 9.2% in Q4, marking the worst result since Q2 2016 (Q3: -4.1% yoy). On the external front, exports of goods and services stabilized year on year in the final quarter, marking a two-year high (Q3: -0.4% yoy). In addition, imports of goods and services rebounded, growing 0.3% in Q4 (Q3: -0.3% yoy).

Recovery in 2025: The economy should return to growth in 2025. The ECB’s monetary policy loosening cycle and stronger EU demand should underpin an acceleration in private spending growth plus rebounds in fixed investment and exports. That said, government spending is set to lose steam, and an EU–U.S. trade war poses a downside risk to overall growth.

Panelist insight: EIU analysts said: “The economy is poised to return to growth in 2025 […]. We expect the labour market to remain tight in the forecast period, upholding domestic demand, further strengthened by the continuation of energy support measures and the ongoing loosening of monetary policy by the ECB. Steady disbursement of EU funds will support government spending and investment projects, while cheaper borrowing should enable an acceleration in credit growth.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Latvian GDP projections for the next ten years from a panel of 15 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for Latvian GDP.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Latvian GDP projections.

Want to get access to the full dataset of Latvian GDP forecasts? Send an email to info@focus-economics.com.