WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

Although the boom continued in the first half of 2022, the Russian war in Ukraine will drag growth in Latvia down in the coming months. Almost all sectors will be affected by a substantial fall in demand growth and by escalating prices. Firms will largely refrain from investing, preferring to deplete their stocks. Moreover, the decline in the purchasing power of households will curb growth in consumption. However, the labour market will remain tight next year. For 2022, we still expect GDP growth to reach 2.9%, but it will then fall back to 0.6% in 2023. We expect a revival of GDP growth in Latvia to 2.3% in 2024 in line with the recovery in the EU.