Latvia’s H1 GDP up by 3.7% y/y, below expectations.

By bne IntelliNews August 9, 2013

In a first estimate of Q2/13 GDP Central Statistical Bureau of Latvia reported seasonally unadjusted GDP growth of 3.8% y/y and seasonally adjusted 0.5% q/q in Q2. In H1, 3.7% y/y growth was seen. The banking analysts surveyed by BNS believe that H1 economic growth was slower than expected. Domestic demand supported the growth while exports slowed down in Q2.

The Bank of Latvia economist Igor Kasjanov commented on makroekonomika.lv that GDP most likely continued to be EU’s fastest growing in y/y terms. At the same time growth pace is slightly slowing down, which is not surprising given weak external environment. The CB economist also notes that slowdown in Europe has been quite long-lasting already, but Latvian economy has proven resilient to it in the past.

The CB reiterated that domestic demand cannot be expected to support the economy in the mid-term. Most recent confidence and new orders date from EU points to a sufficient improvement of external environment in the coming quarters. This makes the central bank hopeful that a slight slowdown in Latvian growth will be temporary.

For Q1/13 Central Statistical Bureau of Latvia reported GDP growth of 3.6% y/y and 1.4% q/q, upping the previous estimate of 3.1% y/y and 1.2% q/q. GDP in current prices in Q1/13 was LVL 3.6bn (EUR 5.12bn). To compare, GDP increased by 5.1% y/y and 1.4% q/q in Q4/12, while in 2012 overall economic growth was 5.6% vs. 5.5% growth seen in 2011.

GDP growth slowing down moderately to 3.6% y/y in Q1/13 and maintaining the same q/q growth pace was a relief: In the beginning of the year the Bank of Latvia was alarmed that economic growth in Latvia could be smaller than expected amidst declining exports and manufacturing and prolonged weak external environment.

However, Q1/13 data shows that domestic demand managed to sufficiently compensate weaker external demand: trade gained 4.6% y/y (15.6% share in GDP), construction advanced by strong 9.8% y/y (3.3% share in GDP). Private final consumption in Q1/13 grew by 4.9% y/y in Q1/13. Gross capital formation declined by 10.6% y/y, which was in part compensated by a 1.1% y/y rise in government spending. Exports of goods increased by 3.6% y/y and exports of services by 1.4% y/y. Imports of goods increased by 1.9% y/y and declined by 3.2% y/y for services.

Recently FinMin revised the GDP growth forecast for 2013 from previous 4% to 4.2%. Medium-term economic growth expectation remains unchanged at 4%. FinMin believes that domestic consumption is going to determine most of economic growth this year, while in the medium term Eurozone recovery, the economy will become more balanced between exports, consumption, and investment.

Latvia’s EconMin expected GDP growth in 2013 and 2014 at 4.5%. The 2014 growth might be lower should the external environment not improve. The Bank of Latvia also announced the revised macroeconomic forecasts in July. GDP growth in 2013 is expected at 4.1% vs. previous forecast of 3.6%. Inflation is seen averaging to 0.7% y/y this year vs. previous forecast of 1% (already cut once from initial 2% expectation).

Related Articles

Latvia heads off Russian gas mischief with legislation on strategic companies

The Latvian parliament passed amendments to national security and commercial laws on March 23, handing the state the power to block the sale of companies considered strategic. The legislation will ... more

EU asks CEE to comment on Russian gas promises

The European Commission has invited comments from Central & Eastern European states on proposals put forward by Russian gas giant Gazprom to meet competition concerns. Visegrad and the Baltic ... more

EBRD says 2016 net profit was around €1bn

The European Bank for Reconstruction and Development (EBRD) said it made a net profit of around €1bn in 2016, up by a quarter from the €802mn it made in ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss