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Bank analysts: Latvia’s GDP may have increased 2.2 – 3.2% in Q3

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUWhen compared to Q3 2018 Latvia’s gross domestic product (GDP) may have increased 2.2 – 3.2% in the same period of 2019, bank analysts predict.

Swedbank acting senior economist Agnese Buceniece says that Q3 2019 GDP increase may be similar to that of Q2 or slightly higher: around 0.6% – 0.8%, according to seasonally adjusted data when compared to the previous quarter. When compared to last year’s Q3, growth may have been around 3% – 3.2%, according to unadjusted data. On top of that, a larger number of days also benefited GDP growth.

«Household consumption remains the main economic growth engine, which benefits from average income growth. This promotes optimism of households for the near future,» said Buceniece.

«This helps promote turnover for industries focused on the domestic market, such as retail trade, healthcare, catering, leisure and entertainment services. Good growth is expected to continue in agriculture, which benefits from expectations for better harvest than last year. Growth is becoming slower in processing industries, especially wood working. This is mainly because of weakened external demand. Export and import turnover decline impacts the transport industry, where a small decline is possible in Q3,» explains Buceniece.

SEB Bank macroeconomic expert Dainis Gašpuitis predicts economic growth in Q3 2019 could be around 2.2% when compared to the same period of 2018.

«Data from Q2 brought about a major disappointment and the look towards economic growth has become more grounded and sometimes pessimistic. Still, I don’t expect any major worsening of the macroeconomic landscape,» said Gašpuitis.

More on this topic: Bank of Latvia downgrades GDP growth outlook to 2.5% for 2019

According to him, the primary negative effect is expected from the finance sector, which is expected to last longer this year. Additionally, the situation is not particularly great in transit. It would be surprising to cancel hopes for ICT sector, which suffered a decline in Q2 even though there is still some potential for it. Currently it seems growth in construction has reached the highest point. It is likely there could be some downward pointing corrections. News about commissioning of several large projects appeared in Q3.

He also notes that the biggest increase is expected for agriculture, whereas consumption, including in retail trade, continued medium-level growth. The same is expected for domestic services. Minimal growth is expected in processing industry. Electricity production sector demonstrated a recovery in August. Continued growth in September had slightly improved general industrial data.

A critical segment is associated with foreign trade – export growth may have stagnated or has slipped into the negative zone.

Luminor Bank expert Pēteris Strautiņš says Latvia’s GDP may have grown 3% in Q3 2019.

«Opposite to the previous year’s quarter, a clearly positive influence was observed for the work days effect,» he said.

According to Strautiņš, there is a high possibility that among the most rapidly growing industries were ones associated with exports of services not associated with transit and finances. Commercial services continue developing well this year. This includes commercial services, ICT services, accommodation and public catering business. This can be concluded from lasting trends observed with Latvia’s economy as the ratio of industries grows. The general mood of consumers in the world and Europe remains strong, which means growth for tourism. Thanks to larger state funding there was very rapid growth of medical services. Similar results can be expected for the second half of next year.

He also mentioned that Eurozone’s processing industry is in recession. Latvia is also affected by decline of prices of different standard wooden product. The transit transport volumes moved within the corridor of lasting fluctuations, but it is also at the low point. Finally, GDP is influenced by the limitation of exports of financial services. Thankfully, however, we are nearing the end of this influence. The largest industries in demand have also increased moderately.

Central Statistical Bureau’s GDP estimate for Q3 2019 will be published 30 October.


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