Flash comment: Latvia - January 31, 2019 flash GDP Q4
Annual GDP records strong 5% growth in Q4 2018

The economic growth remained very strong in Latvia at the end of last year. According to the flash estimate, the quarterly GDP growth slightly decelerated, recording still strong 1.1% (seasonally and calendar adjusted) growth, and the annual growth picked up to 5% (not seasonally adjusted). This suggests that in 2018 as a whole the economy grew by about 4.7% (not seasonally adjusted).

After moderating in the third quarter (to 10%) the annual growth of value added in construction shot up again in the fourth quarter, reaching 24%. The value added in industrial production advanced by stable 2% compared to the fourth quarter of 2017, while the value added in services sectors recorded a solid 4% growth.

2019 starts off with a still strong growth momentum. The economic sentiment marginally eased in January, but it remains well above the long term average. However, capacity constraints (increasing labour shortages, historically high capacity utilisation) are elevated, limiting growth going forward. Moreover, the growth in our trading partners’ economies is slowing. We expect the GDP growth to moderate closer to 3% this year. Domestic demand, especially household consumption, supported by strong labour market and rising purchasing power, will be the main driver of growth.

The risks regarding the growth outlook are tilted to the downside and are mainly external. Escalation of trade conflicts and geopolitical tensions, imposition of new international sanctions, no deal Brexit, and a rise in populism are some of the risks that, in case they materialise, could slow global growth even more.

Note: Forecasts made before the estimate for Q4 GDP growth was available.

PDF-Document Latest Swedbank Economic Outlook (page 18 for Latvia)

For more information please contact Ms. Agnese Buceniece, +371 67445875, agnese.buceniece@swedbank.lv

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