RIGA - Latvia's economy expanded 12 percent in the first half of the year, fueled by trade, construction and manufacturing, the national statistics bureau announced last week. Second-quarter growth amounted to 11.1 percent.
The expansion was driven by an 18.2 percent increase in trade, which counts for more than a fifth of GDP, a 6.5 percent rise in manufacturing (12.4 percent of GDP), and a 16.7 percent increase in construction.
During the second quarter, trade grew by 18.7 percent year-on-year, while transport and communications rose by 10.9 percent. The long-running growth in agricultural output suffered a production decline of 6.4 percent 's due to adverse weather conditions, the bureau said. GDP per capita based on second quarter data was 855 lats (1,216 euros) in constant prices, which is a growth of 11.7 percent or 90 lats from the second quarter of 2005.
Meanwhile, the Economy Ministry has revised its annual growth forecast to 11 percent for 2006. Minister Aigars Stokenbergs told journalists that Latvia's business environment has improved tremendously. Direct investments amounted to 158.9 million lats in the first quarter of 2006, and new technologies have been introduced at an increasing rate in recent years.
The stellar growth continues to impact the consumer price index, and Latvia maintains the highest rate of inflation in the EU. In August prices were down 0.2 percent from July, though annual inflation (as compared with August 2005) was a staggering 6.8 percent, the national statistics office reported last week.
This week the statistics office also announced that construction prices in Latvia grew 18.3 percent year-on-year in the second quarter, compared with 10 percent in Lithuania and 8.4 percent in Estonia.