Bank experts predict that Latvian Gross Domestic Product (GDP) will grow by 5.4%-5.7% in the second quarter of 2012, compared to the same period of 2011.

Latvia will also have the most rapidly growing economy in Europe in the second quarter, experts say.

Swedbank Chief Economist Martins Kazaks notes that Latvian economy continued to grow in this period: export value, processing industry output, even tax income shows the continuation of economic growth. However, growth is beginning to slow down. The post-crisis slingshot effect has worn off on retail trade, and the second quarter showed that retail trade turnover was 0.2% lower at constant prices, compared to the first quarter. From now on, retail trade will only grow with household income and crediting.

In total, Latvian economy grew by approximately 5.7% in this given period, says the economist, adding that Latvia still has the most rapidly growing economy in Europe.

However, Kazaks also says that GDP growth rates are beginning to drop rapidly because of the slower economic growth. This is mainly due to a smaller base effect and a negative calendar effect – i.e., there are more holidays than work days, compared with last year.

DNB Bank Economic Expert Peteris Strautins estimates that GDP growth in the second quarter of this year was 5.4% at seasonally unadjusted data. Therefore, it seems that it was notably lower than in the first quarter, when GDP grew by 6.9%. The main reason for this is the effect of February 29 on the statistics of the first quarter, Strautins explains.

The seasonally adjusted annual growth rates most likely increased, but only by a small amount, says DNB Economic Expert. If it was 5.6% in the first quarter, then, in the second quarter, it could have been lower by a few tenths of a percentage point lower. Still, it is above 5%.

He explains that economy was pushed forward by export increase in the second quarter. This was also a yet another successful quarter for the processing industry and transport industry, as well as for tourism. Retail trade turnover decreased slightly in comparison to the first quarter, but it is expected that there was an increase in other industries, ones mainly directed towards local demand – business services, construction and others.

Meanwhile, SEB Bank Macroeconomic Expert Dainis Gaspuitis notes: even though future perspectives have become more pessimistic in recent time, Latvian economy steadily grows. Despite the uncertainty, good development rates are maintained by processing industry. Conditions were also good for an increase in trading. Active development was also maintained by transit and tourism industries. Real estate market also became somewhat «livelier». Construction is also going through a notable recovery, says the bank expert. He notes that the increase in tax revenue will also have a good impact on GDP growth.

«GDP growth index is somewhat lower than that of the first quarter, but it is still 5.6%,»- Gaspuitis says.

Finance Ministry reports that Latvian GDP will grow by 4% this year, while the Bank of Latvia projects GDP growth to be within 3.5% – 4% borders in 2012.

Ref: 102.109.109.2950