The Latvian economy grew 2% in unadjusted terms last year, the Baltic state’s Central Statistical Bureau (CSB) reported on February 28. The reading is an upward adjustment from the 1.6% growth estimated in a flash in late January.
Despite the raised reading, the result still shows economic growth hitting the brakes in comparison to the 2.7% expansion in 2015. On the other hand, the fourth quarter growth spurt of 2.6% y/y in unadjusted terms offers hope for this year. Adjusted growth came in at 1.3% for 2016 and 1.1% in the fourth quarter y/y.
The pace of growth in October-December was the fastest since the final quarter of 2015, and vastly superior to the 0.5% gain the previous quarter.
The growth in 2016 came on the back of a 10% y/y expansion in the industrial sector. That was offset by a fall of 18% in the construction sector, which dragged on growth throughout last year due to poor absorption of EU structural funds. Investment dropped 11% through the year.
Consumption expanded 3% last year, slower than 4% in 2015, but still enough to have been the key growth driver. Household spending is being boosted by growing wages, which expanded 5% in 2016. Exports also helped with a 4% rise.
The outlook for 2017 is positive, the Bank of Latvia notes, pointing to an expected rebound in investment activity. GDP is expected to grow 2.8% in 2017 and accelerate to 3% in 2018, according to the European Commission.