Latvia's GDP growth continues to run at pace

Take note – story published 5 years ago

The latest flash estimate of the Central Statistical Bureau (CSB) shows that, compared to the 3rd quarter of 2017, in the 3rd quarter of 2018 gross domestic product (GDP) value increased by 4.8 % (according to seasonally and calendar non-adjusted data).

Compared to the 2nd quarter of 2018, GDP rose by 1.8 % (seasonally and calendar adjusted data).

The upward pressure on the GDP value was exerted by the output increase in construction (of 10 %), retail trade (2 %) and industry (1 %), the CSB said.

The Finance Ministry said the data showed its existing forecasts for GDP growth were on target.

"In September... the Ministry of Finance (FM) updated its forecasts for macroeconomic indicators, raising the economic growth forecast for 2018 by 0.2 percentage points to 4.2%. The third-quarter GDP quick estimate confirms that economic growth will reach the FM forecast this year or even slightly exceed it. 

"At the same time, it should be noted that external factors for the economic growth of Latvia are no longer as favorable at this time, as they were at the beginning of the year," the ministry said, adding that it expects more modest growth of 3% next year. 

Commenting on the data, Swedbank economist Linda Vildava said: "Value added in construction continued growing at double-digit rates, i.e. 10% over the year. Thus, construction remains one of the fastest growing industries and one of the main growth drivers. However, growth rates have eased from the highs in the first half of the year when the growth surpassed 30% on annual basis. 

"In the first three quarters of 2018, Latvian economy has grown at a surprisingly rapid pace, similar to that of last year. Yet, it will be difficult to maintain such fast growth for long. We expect that growth will gradually slow in the coming quarters from the current highs but will still be good. However, the abundance of negative risks such as persistent political and global trade tensions has a potential to worsen business and household sentiment, thus slowing growth even further," Swedbank added.

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