Latvian industrial production dropped 0.9% y/y in 2014, according to data released by the Central Statistical Bureau on February 3.
Factors that influenced the annual drop were a 6.6% decrease in electricity and gas supply and a slight decrease of 0.1% in manufacturing. That was offset by a growth of 3.2% in mining and quarrying.
Analysts suggest Latvian growth could experience difficulties due to problems in expanding production capacity. That bottleneck is reported to be crimping exports, a key factor for the small and open economy.
In January, the Bank of Latvia carried out another revision of projected GDP growth for 2015. It now expects growth will come in at mere 2%, a sharp drop from the September forecast of 2.7%.
Risks related to further economic growth are “extensive,” the central bank cautioned on February 2. They could be mitigated by large steelmaker Liepajas Metalurgs’ resuming production after having almost gone bankrupt, as well as an improvement in the geopolitical situation and resumption of more stable growth in the Eurozone.
“If stable external demand does not resume and thus export prospects do not improve, such an economic model will not be sustainable in the longer term,” the central bank warned.
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