RIGA - Latvia’s GDP in the third quarter this year, compared to the third quarter 2009, increased 2.7 percent according to seasonally-unadjusted data, reports Nozare.lv. This is the first year-on-year GDP quarterly increase since 2008, according to the Central Statistical Bureau’s flash estimate.
Compared to the second quarter, Latvia’s GDP increased 0.8 percent in the third quarter if calculated according to seasonally adjusted data.
These numbers end nine straight quarters of contraction, the longest decline in the European Union, reports Bloomberg. The results were well above the median estimate of six economists surveyed by the news group, who were expecting GDP growth of 0.7 percent from the year earlier period.
Industrial production expanded 19.4 percent in the third quarter, the statistics office said on Nov. 3. “Manufacturing is the major positive contributor for the third quarter in a row,” said Zigurds Vaikulis, chief economist at Citadele Asset Management in Riga. “Retail and wholesale sales are finally positively contributing.”
Increasing demand for Latvia’s wood and metal products in Western Europe is driving the recovery, with exports rising to 412 million lats (588.5 million euros) in August, the most since September 2008.
Latvia’s economy shrank about 25 percent, the deepest drop in the world according to the International Monetary Fund, after a real estate fueled boom turned bust in 2008 and the country’s second-biggest bank, Parex, failed.
“Exports and household consumption continued to grow in the third quarter,” said Lija Strasuna, an economist at Swedbank in Riga.
The recovery is boosting tax revenue as Latvia seeks 400 million lats in spending cuts and additional income to meet its goal of cutting the budget deficit to six percent of GDP next year. Latvia has already approved austerity measures equal to about 14 percent of economic output after turning to a group led by the European Commission and the IMF for a 7.5 billion euro loan package during the country’s depression.
The crisis pushed unemployment to 19.4 percent in the second quarter from 5.3 percent in the final quarter of 2007, according to figures from a labor force survey. Swedbank estimates the rate will fall to 15 percent in 2012.
“To reach the level of employment we had during the boom years will take many years, if it happens at all,” Strasuna said.