The Bank of Latvia has upgraded the country’s gross domestic product (GDP) growth outlook for 2023 from the previously predicted 0.5% to 1.2%, as LETA was informed by representatives of the central bank.
At the same time, the Bank of Latvia has downgraded the GDP growth outlook for 2024 from 3.7% to 3.1%. For 2025, the central bank predicts GDP growth of 3.5%.
The Bank of Latvia notes that when it comes to private consumption in 2023, it is expected to grow by 1.3%. In 2024 it is expected to grow by 3.9% and in 2025 – by 4.4%.
Government consumption is expected to experience a drop of 4.4% this year, 0.1% next year and 0.5% in 2025.
At the same time, the Bank of Latvia predicts a 0.4% increase for investments in 2023, 4.9% in 2024 and 6.1% in 2025.
For exports the central bank predicts a drop of 0.1% this year, growth of 3% next year and 3.1% growth in 2025.
For imports the central bank predicts a drop of 2.5% this year, growth of 2.8% next year and growth of 3.6% in 2025.
Unemployment is expected to reach 6.7% this year and 6.4% in 2024 and 2025.
The increase in nominal gross wages and salaries is expected at 12% this year, 8.2% next year and 7.8% in 2025.
The general government debt is expected to reach 41.7% of GDP this year, 40.6% of GDP next year and 40.1% of GDP in 2025, according to the Bank of Latvia.
As for budget deficit, the Latvian central bank expects it to reach 3.8% of GDP this year, 2.9% of GDP next year and 1.5% of GDP in 2025.
Representatives of the Bank of Latvia note the growth of the national economy exceeded expectations during the crisis. This, coupled with a slightly changed outlook for this year’s events, allows for an upgrade of the outlook to 1.2% for 2023.
“The surprisingly high private consumption level observed at the end of 2022 and better than expected growth at the start of the year, especially thanks to growth in investments, will change the outlook for this year’s events,” said the representatives of the Bank of Latvia.
With residents using savings for various purchases sooner than expected, the growth of consumption in the coming quarters will become more limited, according to the Bank of Latvia, adding that more rapid consumption growth will start in 2024 only under conditions of more modest inflation. The growth of Latvia’s national economy will speed up in 2024-2025.
Currently energy and other resource costs are in the process of normalising. However, growth of investments is slowed by the general uncertainty in the region, as well as growing lending costs.
In a situation of high uncertainty the role of EU funds will grow. However, implementation of various plans has been very slow so far, admits the Bank of Latvia.
The growth of Latvia’s national economy is limited also by demand outlooks in the country’s main trade partners, especially Estonia and Lithuania, the central bank adds.
Also read: airBaltic dominates Riga Airport with 57% market share