Economic growth in Latvia might resume in mid-2023 - Economics Ministry

RIGA - Economic growth in Latvia might resume in the middle of this year, but in the full 2023, Latvia's gross domestic product will remain largely unchanged from 2022, Janis Salmins, head of the Analytical Service of the Economics Ministry, told LETA. 

According to a flash estimate released on Monday by the Central Statistical Bureau (CSB), compared to the fourth quarter of 2021, Latvia's seasonally and calendar non-adjusted gross domestic product remained unchanged in the fourth quarter of 2022. CSB said that in fourth quarter of last year, Latvia's GDP was affected by a drop of 3.3 percent in producing sectors, but in services sectors there was a growth of 0.7 percent, which means that in 2022, the Latvian economy grew by 1.8 percent. 

Although the fourth-quarter growth figure was quite modest, the economic situation proved slightly better than expected. Considering that in the third quarter of 2022 economic activity slowed by 1.7 percent compared to the second quarter (according to seasonally adjusted data), the situation was expected to deteriorate amid high inflation at the end of the year. As wage growth failed to keep up with price hikes, people's real income dropped and purchasing power weakened. Still, the GDP flash-estimate suggests that in the fourth quarter, Latvia's seasonally and calendar-adjusted GDP grew by 0.3 percent against the second quarter of 2022.

In the last quarter of 2022, industrial production slowed by 3.3 percent, most probably, because of downward trends in the construction sector which was affected by rapidly rising costs. Monthly data shows that in October-November 2022, mining and quarrying, as well as electricity and gas supply declined year-on-year in constant prices. Meanwhile, manufacturing quickened by 2 percent year-on-year. 

Foreign trade and fast import growth also affected Latvia's economic growth figures. In October-November 2022, import of goods grew 31 percent year-on-year in current prices, while exports grew at a more moderate rate, by 18 percent. 

There is still a great deal of uncertainty associated with the impact from Russia's war in Ukraine and related sanctions. This uncertainty is going to affect private consumption, corporate investment and foreign trade. The Latvian economy is expected to see the hardest phase during the first months of this year.