Latvia Economic Growth (Nominal GDP, ann. var. %)

Economic Growth in Latvia

The economy lost steam at the start of 2023: According to a flash estimate, GDP growth moderated to 0.7% in Q1 (Q4 2022: +1.2%). The slowdown came on the back of a drop in the primary and secondary sectors of the economy, while the services sector posted a modest expansion. Still-elevated consumer prices led to subdued growth in retail sales in January–February and likely prevented stronger growth in services. In addition, the ECB’s additional interest rate hikes will have dented investment. Meanwhile, a slowdown in the EU depressed exports growth in the first two months of the quarter below Q4’s average. In the fiscal arena, after the government approved the 2023 budget on 9 March, envisioning a marginally smaller budget deficit of 4.2% of GDP, the Minister of Finance later in the month announced planned revisions to the country’s tax code in order to meet budgetary needs.