Latvia’s GDP increases 11.1% in Q2 2021

In Q2 GDP at current prices was EUR 8.1 billion. As compared to the previous quarter, GDP went up by 4.4 % (according to seasonally and calendar adjusted data at constant prices).
In Q2 2021, compared to the same period of the previous year, drop in agriculture was estimated at 3.1 %, but in forestry and fishing there was a growth of 0.1 % and 7.5 %, respectively, according to data from the Central Statistical Bureau of Latvia.
Significant contribution in total value added growth was provided by activity in manufacturing sectors – rise of 15.2 % (increase was observed in 17 out of 22 sectors). It was significantly affected by successful activity of sub-sectors of manufacture of wood and of products of wood (rise of 17.4 %) – already for the fourth quarter in a row increase was observed both in sawmilling and planing of wood – of 6.4 %, and manufacture of products of wood (manufacture of veneer sheets and wood-based panels, other builders’ carpentry and joinery, wooden containers) – of 24.9 %. Significant increases were also observed in other manufacturing sectors: manufacture of computer, electronic and optical products, manufacture of chemicals and chemical products (16.7 %), manufacture of fabricated metal products (16.2 %), manufacture of non-metallic mineral products (15.0 %).
Growth was also registered in other industry sectors: mining and quarrying – by 9.7 %, electricity, gas, steam and air conditioning supply – by 1.7 % and water supply; sewerage, waste management and remediation activities – by 5.0 %.
Rise in volume of construction sector (of 1.1 %) was positively affected by a 1.3 % increase in civil engineering work carried out (growth in all three sub-sectors) and 6.8 % rise of specialized construction work carried out (increase in 3 out of 4 sub-groups). In turn, there was a drop observed in construction of buildings of 4.7 %.
As the restrictions for the limitation of spread of Covid-19 infection were mitigated, in Q2 2021 trade sub-sectors rose significantly – in trade and repair of motor vehicles and motorcycles there was an increase of 58.5 %, in wholesale trade – of 12.9 %. In retail trade increase (of 8.9 %) was promoted by rise in retail sale of food products by 1.5 % and rise in retail sale of non-food products by 13.6 %.
As restrictions on movement and economic activity reduced, growth in transport and storage sector (of 17.0 %) was positively affected by land and pipeline transport – by 16.5 %, air transport – by 215.9 %, warehousing and support activities for transportation – by 13.0 %, postal and courier activities – by 24.6 %. In turn, development of transport and storage sector was affected negatively by water transport sector – a drop of 12.2 %.
Reduction of travelling and movement restrictions promoted positive development of accommodation and food service activities sectors – rise of 42.5 %, of which accommodation – by 117.9 %, provision of food service activities – by 30.2 %.
Increase in the value added in information and communication sectors of 13.2 % was affected by the rise in volume in information services of 18.6 %, in computer programming and consultancy sector – by 13.2 % and in telecommunication services – by 5.0 %.
In financial and insurance activities increase of 14.3 % was ensured by financial service activities and insurance, reinsurance and pension funding, while there was a fall in activities auxiliary to financial services and insurance activities of 9.7 %. Rise of 17.5 % in financial service activities was affected by increase of commission income and profit on transactions with financial instruments (in contrast to losses in the corresponding period of the previous year).
Growth of 17.7 % in insurance, reinsurance and pension funding was determined by life insurance, where there was a rise in gross premiums written, and private pension plans (3rd pension pillar), where total contributions increased and retirement capital paid out reduced.
Increase of 10.9 % in professional, scientific and technical activities sector was promoted by 18.0 % more services provided in activities of head offices, management consultancy activities, 24.3 % more services provided in other professional, scientific and technical activities, as well as advertising and market research growth of 54.7 %. Drop of 7.3 % in legal and accounting activities left negative impact on the sector.
Administrative and support service activities rose by 7.4 % (increase was observed in all sub-sectors). The largest growth had travel agency, tour operator reservation services, which was affected by measures imposed for restriction of Covid-19 pandemic – by 90.0 %. In largest sectors growth was more moderate: rental and leasing activities – rise of 11.8 %, building maintenance and landscape architectural services – of 2.1 %, labour recruitment and provision of personnel – of 5.1 %.
In Q2 the volume of taxes on products (value added tax, excise and customs taxes) rose by 15.9 %, which was promoted by growth in largest groups of taxes on products – both in value added tax and excise duty revenues.
As compared to GDP flash estimate, the latest information both on assessment of total value added of sectors and on taxes on products concerning the period affected the overall estimate positively. Each of these components enlarged GDP by 0.4 percentage points.
In Q2 2021, compared to the corresponding period of the previous year, total household expenditure rose by 16.2 %. The mitigated Covid-19 restrictions significantly affected expenditure of households on accommodation and food service activities, as well as on recreation and culture. Expenditure in the respective groups rose by 102.4 % and 73.7 %, however, it still lags behind significantly from the level before pandemic. Expenditure of households on transport (public transport, purchase and exploitation of transport vehicle) has grown by 28.3 %. On food products purchased both in retail sale and in e-environment households spent 1.3 % more, but expenditure on housing rose by 4.5 %.
Government final consumption expenditure grew by 7.1 %.
Investment in gross fixed capital formation increased by 11.2 %. Investment in dwellings and other buildings and structures rose by 1.1 %. Investment in machinery and equipment (of which in transport vehicles) rose by 23.8 % and in intellectual property products – by 22.0 %
Exports of goods and services grew by 16.0 %. Exports of goods increased by 17.9 %. Main products exported were wood and products of wood, as well as computers, electronic and optical products. Exports of services increased by 10.2 %. The rise was mainly affected by exports of transport and tourism services, computer services and other economic activities.
Imports of goods and services increased by 32.2 %. Imports of goods increased by 31.6 %, but imports of services – by 36.5%. In imports of products wood and products of wood, as well as computers, electronic and optical products were imported the most. In imports of services volume of transport and tourism services, as well as imports of other economic activities increased the most.
Compared to Q2 2020, in Q2 2021 compensation of employees at current prices increased by 13.6 %, of which total wages and salaries – by 14.2 %, but employers’ social security contributions – by 10.4 %.
The sharpest increase in compensation of employees was registered in the group of public administration and defence; compulsory social security, education, human health and social work activities – by 20.3 %, where rise in compensation of employees in human health and social work activities had the greatest impact.
In manufacturing compensation of employees rose by 17.4 %, but in services sectors compensation of employees increased by 10.8 %.
Gross operating surplus and mixed income increased by 19.5 %, whereas the balance of taxes on production and imports and subsidies – by 24.0 %.