2011-11-09 - Latvia’s Q3 GDP growth strong at 5.7 % yoy (MatasM)

Latvia’s economic growth accelerated to 5.7 % yoy, from 5.6% last quarter. We have expected the growth to be strong on the back of robust results of manufacturing and expanding domestic demand; however the result fell below our expectations (6%). On quarterly basis, gross domestic product went up by 1.3% qoq, compared to 2% last quarter.

Manufacturing turnover (11.8% yoy in the third quarter) and foreign trade statistics, released today also proved an upturn in export-orientated sectors. Moreover, differently from Lithuania and Estonia, Latvia has not yet seen any major decline in business sentiments. However, the surveys suggest, that the negative impact of deteriorating external demand may appear strong next year.

Assessment: We expect growth rate to slow over the next quarter to 4.5% yoy, while the annual real GDP change to stay around 5% in 2011. Next year, however, increasing instability and drop in business sentiments may trim the growth rate of Latvia’s economy to below 3%.

Jekaterina Rojaka
Chief Economist

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