Latvia Economic Forecast

Latvia Economic Outlook

September 25, 2018

A second GDP release confirmed that the economy fired on all cylinders in the second quarter, propped up by a healthy external sector and buoyant investment activity. Exports growth soared at a five-year high in Q2 supported by solid demand for Latvia’s key exports commodities, namely: food, wood, metals and cereals. Meanwhile, domestic demand dynamics remained strong. A booming construction sector bolstered fixed investment growth, while household spending remained elevated on the back of lower unemployment and rising wages. Third-quarter data also continued to be upbeat. Industrial output accelerated markedly in July, while economic sentiment hit a six-month high in the same month. In addition, retail sales growth remained healthy in July and unemployment edged down in August, boding well for private consumption. In the political arena, the Latvian electorate will head to the polls on 6 October. Despite gains from anti-establishment parties, the current incumbents, the Union of Greens and Farmers, lead the polls.

Latvia Economic Growth

Higher household income—partly due to taxation system changes implemented this year—and a tighter labor market are seen driving private consumption growth in 2019. Domestic demand should be further supported by a solid increase in fixed investment, albeit below 2018’s expected stellar outturn. Risks to the long-term outlook stem from volatility in economic sentiment in the euro area and heightened geopolitical risks. Met the why particular panelists see GDP increasing 4.1% in 2018 and 3.4% in 2019, which is down 0.1 percentage points from last month’s forecast.

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 Rate1.160.65 %Oct 12
Stock Market9350.17 %Oct 12

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