Annual GDP growth at 2.7% in 2Q 2015
According to the flash estimate by the Central Statistical Bureau of Latvia, Latvian GDP grew by 2.7% in the second quarter of GDP comparing to a year ago (not adjusted). This is substantially swifter than in the previous quarter (1.9%) and also above our expectations. Seasonally adjusted quarterly growth was at 1.2% (0.4% in the first quarter).
Partly such a remarkable performance can be attributed to contribution of manufacturing, namely, resuming production at Liepajas Metallurgs, the largest steel plant. However, it seems that the growth was rather broad-based - both household consumption and exports contributed to growth, and it is likely that investments picked up as well. At the same time, import growth most likely was still rather weak.
Household consumption growth was supported by continuously strong wage growth, stable confidence and weak inflation. Export performance also seems to have remained good, not only owing to metal industry, but also other manufacturing sectors. Picked up imports of machinery and equipment signal to recovering investment activity growth.
GDP data can still be revised, but it still seems that the growth in the first half has been stronger than expected. This implies that we might revise our GDP growth forecast upwards for this year (currently at 1.9%). It also seems that the growh in Latvia has been the strongest in the Baltics this year. However, one should not forget that there are still quite many risks for economic growth going forward. One of them is of course economic and political development in Russia, but also more broadly what the global growth will be. The largest risk for global growth is imbalances and financial market volatility in China.
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