Latvian GDP growth to run ahead of EU average

Latvia's economy will grow by a modest 1.4 percent in 2023, according to the latest Spring forecasts of the European Commission, published May 15.

The predicted growth is ahead of overall EU GDP growth of 1.0% in 2023 (up from 0.8% in the previous forecast).

In 2024 the EC expects growth of 1.7% in the EU (up from 1.6%) and again Latvia is predicted to run well ahead of the curve with 2024 growth of 2.8%.

"In 2023, GDP is forecast to grow by 1.4%, hampered by high inflation weighing on private consumption and a delay in public investment programmes. Growth is expected to pick up by mid-year as inflation subsides and investment gains momentum," said the EC.

"The economy is set to continue on this trajectory in 2024 with GDP growth reaching 2.8%. Inflation is expected to take some time to slow, staying close to double digit levels in 2023. By 2024, a decline in energy prices and a broad-based slowdown in other price categories are set to bring inflation down to 1.7%. Unemployment is forecast to decrease slightly in 2023 and then some more in 2024. The general government deficit is set to decrease to 3.8% of GDP in 2023 and to 2.7% in 2024."

Latvia Economic Indicators 2022 2023 2024
GDP growth (%, yoy) 2,8 1,4 2,8
Inflation (%, yoy) 17,2 9,3 1,7
Unemployment (%) 6,9 6,8 6,5
General government balance (% of GDP) -4,4 -3,8 -2,7
Gross public debt (% of GDP) 40,8 39,7 40,5
Current account balance (% of GDP) -6,1 -3,4 -2,7

"The slowdown of growth at the turn of the year is expected to loosen up the labor market slightly, as evidenced by recently falling job vacancies and the edging up of the unemployment rate. However, once growth picks up in the second part of 2023, the labor market is expected to tighten on the back of increasing demand and falling supply due to ageing. Wage growh is set to stay strong over the forecast period, supported by labor market tightness and minimum wage increases," said the EC.

"Going forward, energy price inflation is set to turn negative and other price components, except services, to slow considerably. Overall, inflation in 2023 is forecast at 9.3%, with core inflation only slightly higher. By 2024, inflation is expected to slow down to 1.7%, but core inflation is projected to remain above 2% as services price growth is expected to accelerate," it added.

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