The forecasts were revised on account of lower than expected GDP growth in the second quarter of 2023 and a slightly changed outlook for the following years, but revisions of historical data also play a significant role in GDP components, LB said.
GDP growth for this year is now predicted to be just 0.6%, half the 1.2% equivalent figure in June.
Annual inflation is now expected to be 9.0% in 2023, an increase on June's figure of 8.5%.
|
Latvijas Banka's forecasts |
|||||||||
|
2023 |
2024 |
2025 |
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|
Economic activity (annual changes; %; at constant prices; seasonally adjusted data) |
|||||||||
|
GDP |
|
0.6 |
3.0 |
3.6 |
|||||
|
Private consumption |
|
–0.5 |
4.0 |
4.4 |
|||||
|
Government consumption |
|
4.3 |
0.2 |
0.4 |
|||||
|
Investments |
|
6.0 |
4.9 |
5.7 |
|||||
|
Exports |
|
–1.7 |
2.1 |
3.1 |
|||||
|
Imports |
|
–1.9 |
1.8 |
3.4 |
|||||
|
HICP inflation (annual changes; %) |
|||||||||
|
Inflation |
|
9.0 |
2.3 |
2.5 |
|||||
|
Core inflation (excluding food and energy prices) |
|
8.2 |
5.3 |
4.2 |
|||||
|
Labour market |
|||||||||
|
Unemployment (% of the economically active population; seasonally adjusted data) |
|
6.4 |
6.2 |
6.2 |
|||||
|
Nominal gross wage (annual changes; %) |
|
12.0 |
8.2 |
7.8 |
|||||
|
External sector |
|||||||||
|
Current account balance (% of GDP) |
|
–3.1 |
–3.5 |
–3.9 |
|||||
|
Government finances (% of GDP) |
|||||||||
|
General government debt |
|
42.0 |
41.6 |
40.9 |
|||||
|
Budget surplus/deficit |
|
–3.3 |
3.0 |
–1.7 |
|||||
LB was only able to offer tentative encouragement as far as this year is concerned, saying "economic activity might recover gradually by the end of this year, as household purchasing power is expected to recover and investments are projected to follow an upward trend."
In line with previous forecasts, it is expected that Latvia's economic growth will improve in 2024 and 2025, with GDP growing by 3.0% and 3.6% respectively (according to the June forecast – by 3.1% and 3.5% respectively).
The latest forecasts have been drawn up "amid persistently high uncertainty" the central bank emphasised.
"While the baseline scenario involves the recovery of healthy economic growth, concerns persist about the adverse effects of the increase in labour costs on Latvia's competitiveness and thus the return to a sluggish economic growth. Weaknesses lie in both the labour market characterised by labour shortages and firms' investment opportunities hampered by barriers stemming from lending and the construction process," LB warned.
