The Latvian economy grew 4% in the first quarter, the Baltic state’s Central Statistical Bureau (CSB) reported on May 31.
The reading is an upward revision on the 3.9% y/y growth published in a flash estimate, and illustrates a serious pick up on the gain of 2.6% in the fourth quarter of last year. The result is in line with regional results, and matches expectations that 2017 will see a signficant acceleration in the economy.
The January-March expansion is the fastest since the third quarter of 2015, and signals a third consecutive quarter of accelerating growth. In quarterly terms, GDP expanded an adjusted 1.6%.
The gain in activity was driven by a 5.1% gain in consumption, including 6% growth in private consumption. With the labour market continuing to tighten, that remains the key driver of the economy.
However, other sectors are now starting to lend a hand. Fixed investment grew 8.8% y/y in the first quarter. There was an 8.4% y/y expansion in construction - a proxy for investment. The sector proved a significant drag during much of 2016 but is currently embarking on a recovery as take-up of EU funding improves.
Exports also helped, contributing an 8.3% rise. Manufacturing grew 10.3%.
The outlook for 2017 is positive. GDP is expected to grow 3.2% in 2017 and accelerate to 3.5% in 2018, according to the European Commission.