The Latvian economy grew 4.8% in the second quarter, the Baltic state’s Central Statistical Bureau (CSB) confirmed on August 31.

The reading confirms the result published in a flash estimate in late July, and represents a pick up in the pace of growth after a rise of 4% in the first quarter. The figure is also in line with regional results, and matches expectations that 2017 will see a significant acceleration in the economy.

The April-June expansion is the fourth consecutive quarter of accelerating growth. In quarterly terms, GDP expanded an adjusted 1.2%. In unadjusted terms, the economy grew 4% y/y in the second quarter.

The gain in activity was driven by a 26.1% annual gain in investment, while household consumption grew 4.3% on the year. Driven by EU funding, investment is expected to couple with private consumption – propped up by rising wages as the labour market keeps tightening  as key drivers of the economy. 

There also was a 15.9% 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. Manufacturing grew 7.1%. Exports also helped, contributing a 5.1% rise. 

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. "This and next year the economy will expand by about 4%. The growth will slow in 2019 as the world business cycle matures," Swedbank predicts.