flash comment: latvia - march 11, 2013
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7/29/2019 Flash comment: Latvia - March 11, 2013
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Flash comment: LatviaEconomic commentary by Economic Research Department March 11, 2013
The growth will slow this year, but to remain among EU frontrunners
Annual growth, %
-10%
0%
10%
20%
30%
40%
1Q 11 1Q 12
GDP Exports
Household cons. ImportsInvest. (w/o stocks) Source: CSBL
Annual growth in major industries, %
-3 0 3 6 9 12 15 18 21
Agriculture etc.
Manufacturing
Construction
Domestic trade
Transport etc.
Hotels, restaurants
IT, communications
Financial sector
Real estate activities
Other com. services
2011
2012
Contribution to GDP annual growth, %
-40
-30
-20
-10
0
10
20
2008 2009 2010 2011 2012
Households Government
Invest. (w/o stocks) Stocks
Net exports GDP growthSource: CSBL
According to the revised data by the Latvian Central Statistical Bureau(CSBL), economic growth slowed from 7% annually in the first quarter
to 5.1% in the fourth quarter of last year. In 2012 overall, Latvian GDP
grew a bit stronger than a year before (5.6% vs. 5.5%). The growth
was observed in almost all industries in some it was slower than a
year before (e.g., manufacturing, domestic trade, transport, tourism), in
some it picked up (construction, agriculture, information and
communications, financial intermediation).
Growth in exporting sectors slowed last year, hindered by stagnating
European economy and thus quite a weak demand for Latvian goods
and services. However, exports remained the main growth driver.
Moreover, since import growth decelerated notably, net exports
contribution was again positive in 2012 after two years break. Exportsgrew by 7.1%, while imports by 3.1% last year.
Investment growth also beame more sluggish in 2012, although annual
growth of gross fixed capital formation picked up somewhat in the last
quarter (to 4.2% from 2% a quarter before). Last year gross fixed
capital formation increased by 12.3%. With investments into private
and public infrastructure, construction growth sped up.
In turn, household consumption growth picked up last year (to 5.4%).
So, success of exporters spilled over also to domestic market, even
though growth of services sectors oriented to domestic market remains
much slower than in exporting sectors. Anyways, growing economic
activity brought improvements to labour market employment and
wages have been rising, while inflation has been very moderate.
Consumer optimism improved and thus household spending rose.
Outlook
Still, economic growth is slowing down. It could be seen already in the
fourth quarter last year and early this year. For instance, manufacturing
volumes were flat in January 2013 comparing to the year before, while
annual growth of retail trade turnover slowed to 5.2% (7.4% in 2012).
Taking into consideration low saving level and small size of the Latvian
economy, domestic demand growth cannot be sustainable without
export growth. Export growth will be slower this year, owing to weak
demand in Europe, and this will undermine also investments and
consumption. Swedbank forecasts GDP growth this year to be about
4%, remaining one of the strongest in the EU.
Lija Strauna
Senior Economist
+ 371 6 744 5875
Swedbank Economic Research Department
SE-105 34 Stockholm, [email protected]
Legally responsible publisherMagnus Alvesson, +46 8 5859 3341
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