RIGA - Latvian economy has fared better than anticipated during the Covid-19 crisis, the Finance Ministry told LETA.
Latvia's gross domestic product decreased 9.8 percent in the second quarter year on year due to the impact of the Covid-19 crisis, according to the Central Statistical Bureau's flash estimate released earlier today.
"Even though this is the steepest fall since 2010, the economic downturn has been less severe than anticipated as manufacturing industries were more resilient and service sector has been recovering faster than anticipated. The economic downturn has also been much less severe than in 2009 and 2010, when GDP reductions exceeded 10 percent for five successive quarters, and in some quarters they were close to 16 percent. Compared to the first quarter of 2020, GDP fell by 7.5 percent according to seasonally and calendar adjusted data," said the ministry.
The Finance Ministry explains that the rapid economic decline in the second quarter was caused by the quick spread of the new coronavirus and restrictions introduced to contain the virus, which is why the service sector experienced a sharper downturn as compared to the second quarter, 11 percent, while manufacturing only decreased 3.8 percent.
"The flash estimate does not provide detailed information on individual sectors, but it is clear that accommodation and catering, art, recreation and professional services were the sectors hit the hardest as they were affected the most by the restrictions introduced during the state of emergency. Transport volumes have also fallen steeply after international passenger transport was suspended and Russian freight transit volumes decreased. As a result, ports' cargo turnover decreased by more than 30 percent, while passenger transport by rail fell 45 percent in the second quarter," said the Finance Ministry.
On the other hand, manufacturing has fared much better and the sector's output decreased by no more than 10 percent in April and May, while in June, the decrease could have been smaller.
A few more European Union member countries have also released their GDP data. Of these, only Lithuania reported less severe downturn than Latvia, 3.7 percent, while in Spain and France GDP decreased 20 percent as compared to the second quarter of 2019, while the EU's average economic decline was 14.4 percent.
The Finance Ministry also refers to the State Employment Agency's data, which indicate that unemployment is not growing anymore and the number of unemployed in Latvia could start to decrease in July.
Based on developments over the past several months, the overall economic downturn in 2020 may turn out to be slower than what the Finance Ministry projected at the beginning of June, when the ministry said it expected Latvia's GDP to fall 7 percent in 2020.