Latvia Foreign Direct Investment (EUR bn)

A preliminary release showed the economy stagnated in Q4 in annual terms. Q4’s result marked a minor improvement from Q3’s downturn. In October–December, industrial output fell at a notably softer pace compared to Q3’s average, while retail sales growth accelerated. That said, a rising unemployment rate and the highest inflation in the Eurozone will have weighed on private spending and investment. Furthermore, weaker growth in merchandise exports points to an ailing external sector. In Q1, GDP will likely be contracting. January’s upticks in the unemployment rate and consumer prices should have restrained household budgets. That said, economic sentiment strengthened to an eight-month high in the same month, boding well for investment and spending. On 3 February, Fitch Ratings affirmed Latvia’s ‘A-’ rating with a stable outlook due to the country’s resilient external sector and low public debt.