Latvia’s economy to experience minimal recovery and growth
According to the European Commission’s Winter 2023 Economic Forecast, Latvia’s economic growth is expected to be minimal this year, with a projected GDP increase of only 0.1%.
Meanwhile, the European Union as a whole is expected to see a GDP growth of 0.8%, and the euro area is predicted to see a growth of 0.9%.
About 2.7% recovery
In 2024, Latvia’s GDP is expected to rebound to 2.7%, while the European Union is forecasted to see a growth of 1.6% and the euro area is predicted to see a growth of 1.5%.
The report suggests that Latvia’s economic growth will remain lackluster at the start of 2023, with a potential pick-up in domestic consumption in the latter half of the year.
The report also notes that EU-funded investments, including those financed by the RRF, are projected to provide a further boost to economic growth in the latter half of the year. However, due to the decline in activity in the latter half of 2022, yearly growth in 2023 is expected to be almost flat.
Latvia’s inflation is expected to remain considerably higher than elsewhere in the EU, with a forecast of 7.9% in 2023, compared to 6.4% in the EU and 5.6% in the eurozone. In 2024, inflation is expected to decline to 1.5% in Latvia, compared to 2.8% in the EU and 2.5% in the eurozone.
The report highlights that consumer price inflation increased rapidly throughout 2022, averaging at 17.2%. However, it appears to have peaked in the third quarter of 2022, with energy prices set to slightly decline during 2023. The report also notes that headline inflation is forecasted to remain elevated at 7.9% in 2023 as the energy price shock works its way through other inflation components.
The economic forecast poses a challenging period for Latvia’s economy, with slowing growth and gradually easing inflation.
The report suggests that Latvia’s neighboring countries in the Baltic States may also be impacted by the country’s economic performance.