Flash Comment: Latvia - December 9, 2011; Stronger GDP growth in 3Q 2011 according to revised data

1. Flash comment: Latvia
Economic commentary by Economic Research Department December 9, 2011
Stronger GDP growth in 3Q 2011 according to revised data
Real GDP growth, %
CSBL notably revised GDP data for the 3rd quarter of this year –
15 Latvian economy grew by 6.6% in annual terms, not 5.7% as flash
10 estimate had showed.
5
Seasonally adjusted data were also revised and revealed stronger
0
growth during the first three quarters of this year. GDP increased
-5
by 1.2%, 2.1% and 1.7% respectively (not 1.1%, 2% and 1.3% as
-10
suggested before).
-15
-20 The largest contribution to strong GDP growth this year has come
-25 from gross fixed capital formation. This is positive news, as these
1Q 07 1Q 09 1Q 11 investments also increase potential economic growth in the future.
Quarterly (sa) Annual (nsa) Household consumption has also grown, owing to rising
Source: CSBL employment and wages.
Contribution to GDP growth, pp At the same time, export growth has started to slow down in the 3rd
quarter, not only due to high base of last year, but also owing to
40
increased uncertainty about developments in Europe. As economic
30
20
growth has been largely export-driven, investments and
10 consumption will move in the same direction as exports.
0
Net export contribution to GDP growth has been negative this year,
-10
-20
as imports have increased somewhat faster than exports. We
-30 believe that import growth is still mostly driven by needs of
-40 exporting sectors, both for capital and intermediate goods. Strong
1Q 07 1Q 08 1Q 09 1Q 10 1Q 11 investment growth thus supports imports.
Net exports
Inventories
Gross fixed capital form.
Government
Outlook
Households
GDP growth Source: CSBL Most likely economic growth will continue to decelerate also in the
4th quarter. Retail trade and manufacturing showed a monthly fall in
Economic sentiment and GDP growth October, economic sentiment is likely to worsen in December (due
115 15% to Latvijas Krājbanka closure and eurozone problems). Still,
110 10%
positive quarterly growth is anticipated for the last quarter.
105 5% GDP growth in 2011 will be higher than our October forecast of
100
0% 4.2% – most likely closer to 5%. However, the growth is expected
95
-5% to slow down in 2012. In our October’s Baltic Sea Report we
90
-10% forecast 3% growth for next year. Currently it seems that economy
85
-15%
might grow slower, but uncertainty is very high, especially with
80
respect to eurozone developments. Whether eurozone experiences
75 -20%
recession or not will definitely influence Latvian export performance
70 -25%
and thus also economic growth.
2006 2007 2008 2009 2010 2011
ESI, points Annual GDP growth (rs) Lija Strašuna
Source: CSBL, DG ECFIN
Senior Economist
+ 371 6 744 5875
lija.strasuna@swedbank.lv
Swedbank Economic Research Department Flash comment is published as a service to our customers. We believe that we have used
reliable sources and methods in the preparation of the analyses reported in this publication.
SE-105 34 Stockholm, Sweden
However, we cannot guarantee the accuracy or completeness of the report and cannot be
ek.sekr@swedbank.com
held responsible for any error or omission in the underlying material or its use. Readers are
www.swedbank.com
encouraged to base any (investment) decisions on other material as well. Neither
Swedbank nor its employees may be held responsible for losses or damages, direct or
Legally responsible publisher
indirect, owing to any errors or omissions in Flash comment.
Cecilia Hermansson, +46 8 5859 7720