Latvia
We have raised our GDP forecast for 2021 slightly to 3.2% (from 2.8%) on the back of stronger external demand and household consumption, the latter driven by net wage growth of above 6%. In 2022, we expect GDP to grow more robustly, by 5%, given the surge in public investment. Latest figures show that the increase in commodity prices has resulted in the consumer price index rising faster than expected; however, inflation will remain at below 2% this year, and even in 2022 is expected to reach only 2.5% for the year. The general budget deficit in 2021 will with 7.5% of GDP substantially exceed last year’s level.
| FORECAST* | ||||||
|---|---|---|---|---|---|---|
| Main Economic Indicators | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Population, 1000 persons | 1927 | 1914 | 1910 | . | . | . |
| GDP, real change in % | 4.0 | 2.0 | -3.6 | 3.2 | 5.0 | 3.8 |
| GDP per capita (EUR at PPP) | 20890 | 21500 | 21400 | . | . | . |
| Gross industrial production, real change in % | 1.5 | 0.9 | -1.5 | . | . | . |
| Unemployment rate - LFS, in %, average | 7.4 | 6.3 | 8.1 | 8.0 | 6.8 | 6.0 |
| Average gross monthly wages, EUR | 1004 | 1076 | 1143 | . | . | . |
| Consumer prices, % p.a. | 2.6 | 2.7 | 0.1 | 1.7 | 2.5 | 3.5 |
| Fiscal balance in % of GDP | -0.8 | -0.6 | -4.5 | -7.5 | -3.0 | -1.5 |
| Public debt in % of GDP | 37.1 | 37.0 | 43.5 | . | . | . |
| Current account in % of GDP | -0.3 | -0.6 | 3.0 | 1.6 | 0.4 | 0.1 |
| FDI inflow, EUR m | 374 | 949 | 684 | . | . | . |
| Gross external debt in % of GDP | 123.3 | 117.3 | 124.2 | . | . | . |
Basic data are continuously updated.
* Forecasts are changed beginning of April, July and November.
See Press Conferences.
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Monthly Report No. 7-8/2021
Vasily Astrov, Alexandra Bykova, Rumen Dobrinsky, Selena Duraković, Richard Grieveson, Doris Hanzl-Weiss, Gabor Hunya, Branimir Jovanovic, Niko Korpar, Sebastian Leitner, Isilda Mara, Olga Pindyuk, Leon Podkaminer, Sandor Richter, Bernd Christoph Ströhm and Maryna Tverdostup
wiiw Monthly Report No. 7-8, July-August 2021
42 pages including 4 Tables and 15 Figures
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LATVIA: Trying to overcome the economic spillover effects of the pandemic
Sebastian Leitner
in: Darkest before the dawn?
wiiw Forecast Report No. Spring 2021, April 2021 , pp. 86-89
Details and Buy
A severe second wave of COVID-19 at the beginning of 2021 and the subsequent extended lockdown measures resulted in a further decline in GDP of 1.3% in Q1. The Latvian government took the decision to boost support measures markedly, making use of EU funds to finance short-time work programmes and further expand public investment. From April onwards, consumption started to surge; and in May, business confidence returned to pre-COVID levels in all the broad sectors. In particular, manufacturing showed an upswing that surpassed all expectations in production and especially exports. We have raised our GDP forecast for 2021 slightly to 3.2% (from 2.8%) on the back of stronger external demand and household consumption, the latter driven by net wage growth of above 6%. In 2022, we expect GDP to grow more robustly, by 5%, given the surge in public investment. Latest figures show that the increase in commodity prices has resulted in the consumer price index rising faster than expected; however, inflation will remain at below 2% this year, and even in 2022 is expected to reach only 2.5% for the year. The general budget deficit in 2021 will with 7.5% of GDP substantially exceed last year’s level.