Annual GDP growth was 2.9% in Q3 2019
solid economic growth of 2.9% in Q3 2019 looks somewhat weaker when the data
are corrected for the number of working days, resulting in a less optimistic
1.9% year-on-year figure.
A key contributor,
rather surprisingly, given the bleak global environment, was exports. With
services exports growing steadily throughout this year, third quarter saw a
pick-up in goods export growth after a year-on-year fall the previous quarter.
This was mostly thanks to excellent crop
yields. Export success was evident also in the commendable performance of the
wholesale trade sector. Furthermore, manufacturing saw a decent quarter, despite
the problems in its key subsector – wood product manufacturing. However, we
expect manufacturing growth to slow in the coming quarters, largely due to the
fragile projected economic growth in key partners.
Despite the weak
retail trade data, but in line with a strong disposable income growth, private
consumption picked up pace in Q3. From the sectoral perspective this was mostly
linked to higher growth in such sectors as food services, arts and
entertainment and professional services.
The other “leg” of
domestic demand – investment – has shown markedly weaker development this year
as opposed to 2018, with Q3 being no exception. This is of course due to the
increased global uncertainty, but also because of internal factors like the fading boost from the EU
Financial services and transportation sector have both seen falling value
added in Q3. In both cases the story is a longer-term one. The financial sector
is experiencing structural changes, which are likely to be beneficial for the
Latvian economy in the medium term. The transportation sector faces a key issue
of Russia diverting its cargoes away from Latvian ports. In some years the
negative effects are less evident, or even cancelled out by successes in air
passenger traffic or growth in cargoes transported by road. However, the
traditional role of the transit sector is to continue diminishing going
Overall, the data are
mostly in line with our projections as presented in the November Swedbank
Economic Outlook. Growth in Latvia is expected to be at 2.3% in 2019, slowing
down to 2.0% in 2020. Some pick-up is expected in the second half of 2020, with
growth reaching 2.5% in 2021.
For more information please contact Ms. Līva Zorgenfreija, +371 67445875, firstname.lastname@example.org
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