Central bank adjusts economic forecasts for Latvia

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Latvijas Banka (LB), the Latvian central bank published revised macroeconomic forecasts March 31, which came with the caveat that at the moment there is "persistently high uncertainty".

The inflation forecast has been revised downwards to 10.0% for 2023 (10.9% in the previous, December 2022 forecast), to 2.7% for 2024 (4.4%) and to 2.6% for 2025 (3.0%).

Meanwhile the gross domestic product (GDP) growth forecast for 2023 has been revised upwards to 0.5% (a 0.3% fall was projected in December), but that in turn reduces the expected GDP growth in the coming years to 3.7% for 2024 (a 4.4% rise was projected in December) and to 3.3% for 2025 (3.5% in December).

"The recession experienced by Latvia's economy in 2022 was shallow; however, the end of the year came as a surprise with a resilient consumption increase: owing to the GDP performance at the end of the previous year, the GDP forecast for 2023 constitutes a 0.5% rise instead of the previously estimated fall," LB explained.

"The most significant risks to Latvia's economic growth involve the persistently low investment level and deteriorating competitiveness. Following the steep rise over the previous years owing to a favourable exports structure, Latvia's global export market share remains resilient. Nevertheless, due to the accumulated input costs, exports could lag behind foreign demand. In the long term, investment is a precondition for a competitive economy," it added.

More detailed information about the latest forecasts is available in the macroeconomic forecasts section of Latvijas Banka's website macroeconomics.lv.

Latvijas Banka's Spring 2023 forecasts

 

2023

2024

2025

Economic activity (annual changes; %; at constant prices; seasonally adjusted data)

 

GDP

0.5

3.7

3.3

Private consumption

0.7

4.2

4.1

Government consumption

–2.0

0.5

0.8

Investment

0.8

5.1

6.0

Exports

–0.4

2.9

3.3

Imports

–4.3

3.0

4.1

HICP inflation (annual changes; %)

 

Inflation

10.0

2.7

2.6

Core inflation (excluding food and energy prices)

7.7

5.8

4.8

Labor market

 

Unemployment (% of the economically active population; seasonally adjusted data)

7.4

7.3

7.0

Nominal gross wage (annual changes; %)

9.1

8.8

7.8

External sector

 

Current account balance (% of GDP)

–2.8

–3.2

–3.8

Government finances (% of GDP)

 

General government debt

41.6

40.0

39.8

Budget surplus/deficit

–4.0

–2.7

–1.5

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