Latvia's economic growth to re-accelerate starting 2021, says bank

Latvia's economy this year and next year will see a slowdown, and in 2021 the gross domestic product (GDP) might grow about 3 percent, but in the following years the growth will accelerate, said Luminor economic Peteris Strautins.

"It was clear that there will be slowdown, but earlier it was expected next year, and not as early as this year. The main reason for slowdown is the situation in global economy," the economist said.

The economist said that Luminor expects Latvia to grow by 2.6 percent in 2019. Next year growth might slip to 1.9%, but in 2021 and following years strong recovery is on the cards. The growth slowdown has been caused by  specific factors, such as declines in timber prices. The biggest impact on economy from this sector will be visible next year.

He also said that the construction sector will affect the situation because the government budget was adopted later, and construction procurements by local governments were also delayed.

"Industrial surveys already show recession in the world and euro area. Germany shows the worst situation and it will also leave an impact on Latvia," said Strautins.

At the same time, consumption keeps growing and unemployment keeps declining.

The economist said that Latvia is significantly affected by what is happening in export markets, but the link between growth in Europe and Latvia is not as close as it might seem. "Latvia's economy is not just exports, consumer sentiment, lending cycle in Latvian banks have as large impact on the economy," said Strautins.

The economist said that acceleration in 2021 and further years will be fostered by Rail Baltica project. Also, there are ongoing structural changes in Latvia's economy - services export is growing.

Manufacturing sector will grow slowly for a while, especially due to problems in timber processing, but the situation is quite favorable in other sectors, said Strautins.

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