Latvia Economic Forecast

Latvia Economic Outlook

January 29, 2019

Following months of uncertainty and two unsuccessful attempts to form a government by nominees from the New Conservative Party and the populist KPV, the government led by Krisjanis Karins—the leader of New Unity which won only 6.7% of the vote—was approved by parliament on 23 January. According to the government declaration, the center-right coalition government will maintain the country’s pro-Western course and focus on strengthening its distressed financial system. It has also pledged to reduce income inequality and increase competitiveness by enhancing social policies and implementing healthcare, education and labor taxation reforms, while maintaining strict fiscal discipline and targeting a budget surplus. Meanwhile, against this backdrop, the economy seems to have finished 2018 on a strong footing, although growth likely lost some traction in Q4. The overall expansion appears to have been driven by strong growth dynamics on the domestic front as tighter labor market conditions likely bolstered private consumption.

Latvia Economic Growth

Growth is set to decelerate this year partly due to softer export demand amid elevated global trade tensions and a deterioration in the general EU business environment. Furthermore, increasing labor shortages and slow productivity growth are likely to weigh on firms’ expansion plans. Nevertheless, household spending should increase at a robust pace, propped up by a tightening labor market. This, together with solid investment growth, should spearhead the overall expansion. Met the why particular panelists see GDP increasing 3.5% in 2019, up 0.1 percentage points from last month’s forecast, and 3.2% in 2020.

Latvia Economy Data

20132014201520162017
Population (million)2.02.02.02.02.0
GDP per capita (EUR)11,25811,80312,24612,65913,773
GDP (EUR bn)22.823.624.324.926.9
Economic Growth (GDP, annual variation in %)2.41.93.02.24.5
Consumption (annual variation in %)5.11.42.53.35.1
Investment (annual variation in %)-6.00.1-0.5-15.016.0
Industrial Production (annual variation in %)-0.9-1.13.65.48.5
Retail Sales (annual variation in %)3.83.64.92.34.3
Unemployment Rate11.911.99.99.78.7
Fiscal Balance (% of GDP)-1.2-1.5-1.40.1-0.5
Public Debt (% of GDP)39.011.936.811.511.1
Money (annual variation in %)8.011.813.97.45.9
Inflation Rate (CPI, annual variation in %, eop)-0.40.20.32.22.2
Inflation Rate (HICP, annual variation in %)0.00.70.20.12.9
Inflation (PPI, annual variation in %)1.50.4-0.9-2.42.6
Policy Interest Rate (%)0.250.050.050.00.0
Stock Market (annual variation in %)16.2-11.345.723.535.8
Exchange Rate (vs USD)1.381.211.091.051.20
Exchange Rate (vs USD, aop)1.331.331.111.111.13
Current Account (% of GDP)-2.7-2.0-0.81.5-0.9
Current Account Balance (EUR bn)-0.6-0.5-0.20.4-0.2
Trade Balance (EUR billion)-2.6-2.4-2.1-1.9-2.6
Exports (EUR billion)11.011.211.411.411.4
Imports (EUR billion)12.612.712.512.214.0
Exports (annual variation in %)1.52.31.1-0.111.0
Imports (annual variation in %)1.00.2-1.3-1.914.5
International Reserves (EUR)5.82.73.23.33.9
External Debt (% of GDP)134143142148141

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Latvia Facts

ValueChangeDate
Bond Yield0.550.0 %Jun 30
Exchange Rate1.130.65 %Feb 14
Stock Market9810.17 %Feb 14

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