GDP growth expected to continue

  • 2011-08-10
  • From wire reports

RIGA - Latvia’s GDP in the second quarter this year increased 5.3 percent as compared with the second quarter of 2010, according to the Central Statistical Bureau’s flash estimate, reports Seasonally adjusted data show that Latvia’s GDP in the second quarter increased 2.2 percent from the first quarter.

Leading up to the release of the data, DnB Nord Bank analyst Peteris Strautins had the most optimistic forecast for GDP growth - a 6 percent increase year-on-year and a 3 percent increase from the first quarter.
Latvijas Krajbanka senior analyst Olga Ertuganova and Swedbank chief economist Dainis Stikuts estimated year-on-year growth at 4.5 percent, whereas SEB Bank macroeconomic expert Dainis Gaspuitis says it would be 4.7 percent.
In a quarterly comparison, Ertuganova’s GDP growth forecast was 1.7 percent, Gaspuitis mentioned 1.8 percent and Stikuts said from 1.5 to 2 percent.

Ertuganova was looking for growth in the second quarter to be quite impressive and probably the highest since 2007. Gaspuitis also says that economic activity in the second quarter was much more convincing than in the first quarter.
“The manufacturing industry continued to develop very successfully. Although retail trade turnover has not increased much, car sales are booming,” said Gaspuitis, adding that commercial activity, the tourism sector and transit also continued to increase. The situation in the construction sector though remains “complicated.”

Strautins believes that GDP growth should have accelerated significantly in the second quarter thanks to very good results in industry, transport and also trade, where the weak retail trade turnover increase should have been compensated by a hike in automobile sales. It is hard to predict how commercial services fared, but its performance should not have been worse than in the first quarter. Even construction could post growth in the second period thanks to the ongoing infrastructure development projects.

He notes a fall in the unemployment level and major tax revenue in the second quarter. Strautins says that Latvia is currently going through a period of rapid growth, which Estonia and Lithuania experienced at the end of 2010 and the beginning of 2011.
The DnB Nord analyst predicted that the positive trends in the second quarter should ensure growth also in the third quarter. At the same time, global economic development is slowing, and there is a risk that Latvia’s economic development could become weaker again at the end of this year and the beginning of 2012, but at the moment “that is just a risk.”

GDP in the first quarter increased 3.5 percent year-on-year, calculated according to seasonally unadjusted data, and 0.3 percent from the fourth quarter of 2010.