Flash Comment: Latvia - August 9, 2011: GDP showed vigorous growth in 2Q 2011

1. Flash comment
Economic commentary by Economic Research Department August 9, 2011
Latvia: GDP showed vigorous growth in 2Q 2011
GDP real growth, % According to the flash estimate by Latvian Central Statistical
Bureau, seasonally adjusted GDP increased by 2.2% QoQ in
15 115
the second quarter of 2011. The quarterly growth accelerated
10 from 0.5% in the 1Q 2011, because imports growth most likely
105
5 decelerated, while exports growth increased. Such a pick up in
0 economic growth was anticipated. For instance, there was a rapid
95
-5 manufacturing growth in the 2nd quarter (7.6% in quarterly terms),
-10
as well as in retail trade turnover (2.7%).
85
-15 Retail trade developments suggested that household consumption
-20 75 showed growth as well. However, there are concerns that this
1Q 06 1Q 07 1Q 08 1Q 09 1Q 10 1Q 11 increase in household activity could be short-lived. The average
QoQ (s.a.) YoY ESI (rs) real wage still does not increase, while emigration reduces the
Source: CSBL population and its purchasing power. In addition, low savings level
implies that people do not have the adequate safety cushion.
In annual terms, the economic growth picked up to 5.3% (not
seasonally adjusted). There have already been talks that smaller
fiscal consolidation will be necessary for 2012 (so far there have
been estimates of about 1.1-1.3% of GDP). However, we believe
that it is too early to talk about it – the impact of recent
developments in global financial markets on global and Latvian
economic growth is still unclear, but it should not be
underestimated.
We maintain our GDP growth forecast at 4% for this year.
Dainis Stikuts
Senior Economist
+ 371 6744 5844
dainis.stikuts@swedbank.lv
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