riga, Latvia – Latvia’s Gross Domestic Product (GDP) is poised for a potential uptick in the second quarter of 2025, according to recent analyses from leading financial institutions. Experts predict a range of 0.5% to 1.2% growth compared to the same period last year,signaling a possible recovery for the Baltic nation’s economy.
Economic indicators Point to Modest Expansion
Table of Contents
- 1. Economic indicators Point to Modest Expansion
- 2. Private Consumption and investment as Key Drivers
- 3. Sectoral Performance and Public Sector Influence
- 4. Understanding GDP and Its Importance
- 5. Frequently Asked Questions about latvia’s GDP
- 6. What impact could continued high interest rates, in line with ECB policy, have on Latvia’s forecasted GDP growth of 0.5-1.2%?
- 7. Latvia’s Second Quarter GDP Growth Forecasted at 0.5-1.2% by Bank Analysts
- 8. Recent Economic Performance & Key Drivers
- 9. Sector-Specific Analysis: Growth hotspots & Challenges
- 10. Manufacturing Sector
- 11. Service Sector
- 12. Agricultural Sector
- 13. Inflation & Monetary Policy Impact
- 14. Regional Comparisons: Latvia vs. Baltic Neighbors
- 15. Risks & Uncertainties Affecting the Forecast
- 16. Investment Opportunities in Latvia
Swedbank’s Chief Economist in Latvia, liva Zorgenfreija, suggests a 0.7% increase in GDP for the second quarter of 2025 when contrasted with the preceding quarter. Her assessment also forecasts a 0.5% rise compared to the second quarter of the previous year. Several sectors appear to be driving this optimistic outlook,including construction,manufacturing,Information and interaction Technology (ICT),and the hospitality industry.
Though, not all sectors are performing equally well. Retail and transportation continue to lag,presenting challenges to overall economic momentum. This uneven performance underscores the need for a nuanced understanding of the factors at play.
Private Consumption and investment as Key Drivers
Dainis Gašpuitis, a Macroeconomic Expert at SEB banka, aligns with the overall positive trend, estimating a 0.5% quarterly growth and a 1.2% year-on-year increase in Latvia’s GDP. He emphasizes that private consumption is the most crucial factor determining the final figures. While retail data indicates consumer caution in certain areas, robust growth is being observed in the housing market and automobile sales.
Gašpuitis also notes that the unusually cool summer weather may have dampened consumer spending, while investment continues to bolster the construction sector.Furthermore, he suggests the export and manufacturing industries are poised to contribute positively to the GDP.
Did You Know? Latvia’s economic performance is closely tied to its trade partners in the European Union,making it sensitive to broader economic trends in the region.
Sectoral Performance and Public Sector Influence
Peteris Strautins, an Economist at Luminor bank, presents a more optimistic scenario, forecasting potential GDP growth of up to 3% after several years ranging from -0.3% to +0.7%. He highlights meaningful gains in retail sales, manufacturing output, and transport, with real estate and construction also showing promising signs.
However, Strautins cautions that changes in turnover and production do not perfectly translate to GDP dynamics.He also points out the unpredictable nature of the public sector, which has historically displayed significant fluctuations in performance data. The Central Statistical Bureau is scheduled to release the official GDP data for the second quarter of 2025 on Friday, August 29th.
| Analyst | GDP Growth (Q2 2025 vs. Q2 2024) | GDP Growth (Q2 2025 vs. Q1 2025) |
|---|---|---|
| Liva Zorgenfreija (Swedbank) | 0.5% | 0.7% |
| dainis Gašpuitis (SEB banka) | 1.2% | 0.5% |
| Peteris Strautins (Luminor Bank) | Up to 3% | N/A |
Last year, Latvia experienced a 0.4% decrease in GDP at constant prices compared to 2023, indicating the potential for improvement in the current year. These projections follow a period of economic adjustments and challenges.
Pro Tip: keep a close watch on key economic indicators like retail sales, construction activity, and export data to gain a deeper understanding of Latvia’s economic trajectory.
Understanding GDP and Its Importance
Gross Domestic product (GDP) is a fundamental measure of a nation’s economic health. It represents the total value of all goods and services produced within a contry’s borders during a specific period. Tracking GDP growth is crucial for policymakers,investors,and citizens alike,as it provides insights into living standards,job creation,and overall economic stability.
The Baltic states, including Latvia, have demonstrated resilience in the face of global economic challenges. Their integration into the European Union and their commitment to free-market principles have been key factors in their economic growth. However, they remain vulnerable to external shocks, such as fluctuations in commodity prices and geopolitical events. International monetary Fund – Latvia
Frequently Asked Questions about latvia’s GDP
- What is Latvia’s GDP? Latvia’s GDP is the total value of all goods and services produced within the country,serving as a key indicator of economic health.
- What factors influence Latvia’s GDP growth? Key factors include private consumption, investment, export performance, and the performance of the public sector.
- What sectors are driving GDP growth in Latvia? Construction, manufacturing, ICT, and hospitality are currently showing strong growth potential.
- What are the challenges to Latvia’s GDP growth? Lagging performance in retail and transportation, as well as potential external economic shocks, pose challenges.
- When will the official Q2 2025 GDP data be released? The Central Statistical Bureau will release the official data on friday, august 29th.
What are your thoughts on Latvia’s economic outlook? Do you believe these projected growth rates are realistic?
What impact could continued high interest rates, in line with ECB policy, have on Latvia’s forecasted GDP growth of 0.5-1.2%?
Latvia’s Second Quarter GDP Growth Forecasted at 0.5-1.2% by Bank Analysts
Recent Economic Performance & Key Drivers
Bank analysts are currently forecasting Latvia’s Gross Domestic product (GDP) growth for the second quarter of 2025 to fall within the range of 0.5% to 1.2%. This represents a moderate expansion, influenced by a complex interplay of domestic and international economic factors. Several key indicators are contributing to this projected growth, including:
Export Performance: While global demand remains somewhat subdued, latvian exports, notably in wood products, machinery, and transport equipment, have shown resilience.
Household Consumption: Consumer spending continues to be a significant driver, supported by relatively stable employment levels and moderate wage growth. Though, inflation, though easing, still impacts disposable income.
Investment: Foreign direct investment (FDI) in sectors like IT and logistics is providing a boost, though overall investment levels remain cautious.
EU Funds Absorption: Latvia is actively working to absorb EU funding allocated for infrastructure projects and economic growth initiatives, which is expected to contribute to GDP growth.
Sector-Specific Analysis: Growth hotspots & Challenges
A closer look at individual sectors reveals a nuanced picture of Latvia’s economic landscape.
Manufacturing Sector
the manufacturing sector, a cornerstone of the Latvian economy, is experiencing mixed results. While export-oriented manufacturing is performing well, domestic demand for manufactured goods remains relatively weak. Challenges include rising energy costs and supply chain disruptions.
Service Sector
The service sector, particularly tourism and IT services, is demonstrating stronger growth potential.
Tourism: Latvia’s tourism industry is recovering from the pandemic, with increasing numbers of visitors from neighboring countries and Western Europe. Riga, the capital city, remains a popular destination.
IT Services: The IT sector is a rapidly growing segment, attracting both domestic and foreign investment.Latvia is positioning itself as a regional hub for software development and digital innovation.
Agricultural Sector
The agricultural sector faces challenges related to weather conditions and fluctuating commodity prices.Though, the sector remains crucial for rural employment and export earnings.
Inflation & Monetary Policy Impact
Inflation in Latvia has been moderating in recent months, but remains above the European Central Bank’s (ECB) target of 2%. The Bank of Latvia, in line with the ECB, has been implementing monetary policy measures to curb inflation, including interest rate hikes. These measures, while necessary to control price increases, could possibly dampen economic growth. The current base interest rate is 4.5%.
Regional Comparisons: Latvia vs. Baltic Neighbors
Compared to its Baltic neighbors, Latvia’s GDP growth forecast is broadly in line with Estonia and Lithuania.
Estonia: Analysts predict Estonia’s Q2 GDP growth to be around 0.8-1.5%.
Lithuania: Lithuania is expected to see growth in the range of 0.6-1.3%.
The Baltic states share similar economic structures and face comparable challenges, including reliance on external demand and vulnerability to geopolitical risks. Notably,the cultural landscape of Latvia,as highlighted in recent reports,shows a strong Russian influence,particularly among older generations,impacting language use in business and daily life. This is a unique characteristic within the Baltic region.
Risks & Uncertainties Affecting the Forecast
Several risks and uncertainties could impact Latvia’s GDP growth in the coming months:
- Geopolitical Tensions: The ongoing conflict in Ukraine and broader geopolitical instability pose a significant risk to the Latvian economy, particularly through disruptions to trade and energy supplies.
- Global Economic Slowdown: A slowdown in the global economy,particularly in key trading partners like Germany and Sweden,could dampen demand for Latvian exports.
- Energy Prices: Fluctuations in energy prices remain a major concern, as Latvia is heavily reliant on imported energy.
- Labor Market: A tightening labor market and skills shortages could constrain economic growth.
Investment Opportunities in Latvia
Despite the challenges
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