Latvian growth continues downward trend in second quarter

Latvian growth continues downward trend in second quarter
By bne IntelliNews August 31, 2016

The Latvian economy grew a seasonally adjusted 0.8% y/y in the second quarter, data from the Central Statistical Bureau (CSB) showed on August 31. The reading is a upwards revision from the 0.7% published in flash estimate a month earlier, but still extends a descending GDP growth trend to 12 months. 

Economic growth slowed in comparison to the 1.3% expansion reported for January-March. The result showed expansion ground to its slowest in any quarter since the start of 2015.

Ongoing problems in the construction sector, in which growth contracted 19% in the second quarter, contributed to the unimpressive reading. Such a big retreat could not be offset by growth in manufacturing and retail trade, which came in at 7.2% and 5.6%, respectively.

Consumption expanded 3.2% on the year, while investment gained 6%. However, within the investment segment, gross fixed capital formation crashed over 26% y/y, the data shows. 

Seasonally unadjusted, growth came in at 2.1% y/y, the same rate as in the previous quarter. In adjusted quarterly terms, the economy expanded 0.6%, after two quarters of contraction.

Despite the weakness seen in the second quarter, the Latvian economy is still forecast to accelerate to grow above 3% in 2016, benefiting from a rising contribution from exports and investment, according to Swedbank.