SEB predicts 3.9% GDP growth for Latvia in 2021

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The Baltic economies have fared significantly better than most euro area countries and are set to return to economic growth this year, according to the latest Nordic Outloook report from SEB bank, one of the region's major financial institutions.

"Official stimulus measures and resilient exports dampened last year’s GDP declines. Continued rapidly rising wages and salaries will improve purchasing power and lay the foundation for a rapid recovery when recently re-imposed restrictions are lifted. Lithuania will grow by just below 2 per cent in 2021 and over 4 per cent in 2022. Latvia's GDP will increase by about 4 per cent this year and 4.5 per cent in 2022, while Estonia's economy will grow by more than 3 per cent this year and close to 4 per cent in 2022," SEB predicts.

Talking specifically about Latvia, SEB says: "Surging COVID-19 infection rates and the resulting lockdown late in 2020 will interrupt the recovery. But this time around, the downturn will be more limited. Lower consumption will be offset by strong growth in manufacturing and merchandise exports. We expect a sizeable economic rebound in Q2 2021. Improved fiscal stimulus should prop up the labour market. We expect the economy to grow by 3.9 per cent this year and 4.6 per cent in 2022 as consumption and investment strengthen."

"There is a risk that the virus may return by year-end, but a recurrence of the current situation will be avoided. The economic rebound will most likely be broad-based. The entertainment, catering and recreation sectors will grow, but continued restrictions may limit momentum. The same goes for tourism and transport, which will not reach precrisis levels before 2022. We expect the negative effects from the transit and financial sectors seen in 2020 to significantly abate this year," SEB says.

The full report can be read online.

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