Latvia's GDP drops 0.3% in 2023

RIGA - In 2023, as compared to 2022, Latvia's gross domestic product (GDP) decreased by 0.3 percent, according to data compiled by the Central Statistical Bureau (CSB).

In 2023, GDP at current prices amounted to EUR 40.3 billion.

Compared to the fourth quarter of 2022, in the fourth quarter of 2023, GDP increased by 0.1 percent (according to seasonally and calendar unadjusted data). Compared to the third quarter, GDP at constant prices increased by 0.8 percent (according to seasonally and calendar adjusted data). In the fourth quarter GDP at current prices was EUR 10.7 billion.

In 2023 value added of producing sectors reduced by 1.4 percent, but in services sector – increased by 0.8 percent.

Decrease was registered in volume of agriculture, forestry and fishing – of 8.1 percent, which was affected by production output drop in crop and livestock production (of 7.8 percent) and forestry and logging (9.2 percent), but rise was observed in fishery (2.2 percent).

A reduction in peat extraction and processing of 19.9 percent, as well as drop in quarrying of gravel and sand of 18.9 percent affected the overall manufacturing volume drop in mining by 19.5 percent.

After a long-term positive contribution to growth of the overall economic development, manufacturing has shown a reduction of 5.2 percent and caused the largest negative impact (-0.7 percentage points) on the total value added. A drop was indicated by 15 out of 22 manufacturing sub-sectors. In the sub-sector having the largest share in manufacturing – manufacture of wood and of products of wood – production output decreased by 8.4 percent. A recession is also observed in manufacture of fabricated metal products (of 6.2 percent), manufacture of other non-metallic products (16.8 percent), manufacture of furniture (20.8 percent), as well as in manufacture of pharmaceutical products and preparations. Growth in manufacture of food products (of 4 percent), manufacture of electrical equipment (12.4 percent), manufacture of computer, electronic and optical products (15.3 percent) had a positive effect on the total value added of the sector.

In electricity, gas, steam and air conditioning supply manufacturing volumes fell by 0.8 percent.

After several years of negative trends, the added value of construction production increased by 18.6 percent in 2023 and was the main positively influencing factor in GDP development (+0.8 percentage points). Over the year, construction of buildings rose by 26.8 percent, civil engineering – by 10.8 percent (of which construction of utility projects – by 36.7 percent, other civil engineering n.e.c. – by 35.7 percent, but construction of roads and railways decreased – by 2.7 percent). During the year volume of specialized construction activities rose by 17.8 percent, of which demolition and site preparation – by 19.7 percent, electrical, plumbing and other construction installation activities – by 21 percent, building completion – by 9.5 percent, but other specialized activities – by 18.9 percent.

Retail trade reduced by 2.5 percent, of which trade in non-food products – by 1.8 percent, but trade in food products – by 3.8 percent. Wholesale trade, retail trade and repair of motor vehicles and motorcycles rose by 11.1 percent, but in wholesale a drop was observed – of 11.3 percent.

All sub-sectors of the transport and storage sector showed negative upturn in 2023, except of air transport (growth of 25.9 percent). In land and pipeline transport activity there was a drop of 5.2 percent, in water transport sector activities – of 11.9 percent, in warehousing and support activities for transportation – of 13.7 percent, in postal and courier activities – of 3 percent. In general, the added value of the transport and storage sector decreased by 7.8 percent.

Volume of services provided in accommodation and catering services increased by 7.4 percent, of which accommodation experienced a rise of 1.5 percent and catering services– of 9.4 percent.

In 2023 information and communication sector experienced an increase of 3 percent, of which in the largest sub-sectors: computer programming and consultancy sector – of 9.7 percent and provision of information services – of 7 percent. A decrease is observed in telecommunication services (of 9.9 percent).

Increase in financial and insurance activities comprised 2.6 percent. Rise of 15 percent in insurance, reinsurance and pension funding was determined by increase in gross premiums written in non-life insurance and increase in contributions in private pension plans made by members of pension plans (3rd pension pillar). Upturn in financial and insurance activities of 6.4 percent was affected by such activities as securities operations and financial market management. In turn, in financial service activities there was a drop of 1.2 percent.

It should be noted that the value added of banks at current prices has increased significantly – by 55.3 percent, however, this increase has occurred at the expense of upturn in prices of services provided (for example, raising interest rates on bank loans).

Volume of professional, scientific and technical activities has reduced by 1 percent in 2023. Development of the sector was promoted by rise in activities of head offices, management consultancy activities and advertising and market research (of 8.1 percent), architectural and engineering services, technical testing and analysis (12.7 percent), provision of other professional, scientific and technical activities (2.6 percent). In turn, negative impact on the development of sector was left by drop in provision of legal and accounting activities (drop of 2 percent) and provision of advertising and market research (22.7 percent).

Rise of administrative and support service activities of 5.4 percent was promoted by positive development in rental and leasing services sector of 4.1 percent and building maintenance and provision of landscape architectural services of 36.7 percent. The sector was negatively affected by drop in labor recruitment and provision of personnel – by 11.3 percent, in security and investigation activities – by 2.3 percent and in office administrative activities – by 2.4 percent.

The successful activity of arts, entertainment and recreation contributed to the growth of the sector by 11.7 percent, compared to the previous year. Development of the sector was positively promoted by an increase in creative and arts activities of 17.8 percent, in sports activities, entertainment and recreation activities – of 12.6 percent, as well as in gambling and betting activities – of 8.3 percent.

In 2023 the volume of taxes on products (mainly value added tax, excise and customs taxes) decreased by 5.1 percent.

In 2023, compared to the previous year, total household expenditure decreased by 1 percent. Volume of food products consumed purchased both in retail sale and in e-environment decreased by 3.4 percent. The use of housing-related goods and services (expenditure on housing, water, electricity, gas and other fuels) decreased by 7.3 percent. Use of transport by households (public transport, purchase and exploitation of transport vehicle) increased by 6.3 percent.

Government final consumption expenditure grew by 7 percent.

Investment in gross fixed capital formation rose by 8.2 percent, of which in dwellings, other buildings and structures it has grown by 18.9 percent, which was mainly affected by the low base effect in 2022. Investment in machinery and equipment (of which in transport vehicles) reduced by 0.3 percent, in intellectual property products (research, computer software, databases, copyrights, etc.) – by 0.8 percent.

Exports of goods and services fell by 5.9 percent, of which exports of goods by 7.1 percent, but exports of services – by 2.6 percent. The main commodities in exports were wood and products of wood (except furniture), machinery and mechanical appliances as well as electrical machinery and equipment. In 2023, the main services exported were exports of transport services and other economic activity (R&D, professional and management consulting, technical, trade-related and other business services).

Imports of goods and services reduced by 2.9 percent, of which imports of goods volume by 3.9 percent, but imports of services increased – by 2.5 percent. Mainly, mineral products, electrical machinery and equipment, vehicles and associated transport equipment were imported. Main imports services: transport services and other economic activity services.

Compared to 2022, in 2023 compensation of employees increased by 12.7 percent, of which total wages and salaries rose by 12.8 percent, but employers' social security contributions by 12.1 percent.

The largest growth in total compensation of employees was in agriculture, forestry and fishing sector (of 22.3 percent); in the sector group of wholesale, retail trade; repair of motor vehicles and motorcycles; transportation and storage; accommodation and food service activities altogether (14.1 percent) and information and communication sector (14 percent). Compensation of employees in services sectors has risen on average by 12.9 percent.

Gross operating surplus and mixed income decreased by 4.6 percent, the balance of taxes on production and imports and subsidies went up by 7.8 percent.