Analytics, Economics, GDP, Latvia

In spring this year the Economics Ministry's estimate of GDP growth in 2016 was 3 %.

"The Latvian economic growth is still closely related to the opportunities for export growth. No serious acceleration of growth is expected in the EU, the biggest of Latvia’s sales markets, therefore steep growth of exports is unlikely,” the ministry said.

Demand in the CIS markets is weak, and exports to third countries still make up a comparatively small portion of total exports.

Exports in constant prices in 2016 might be lower than in 2015 but slight export growth is expected in 2017 as situation will improve in external markets and Latvia will diversify its export markets.

Investments are vital for economic growth but private investments still grow very slowly due to increasing uncertainty about external environment and cautious lending policy pursued by banks. Public sector investments depend very much on the cyclic nature of implementation of the EU structural funds. ”As most of the EU funds will become available only in the second half of the year, investments in 2016 are likely to be smaller than in 2015. But in 2017 the EU structural funds will significantly contribute to investment growth,” the Economics Ministry said.

Private consumption in 2016 will be driven by rising employment and wages. Moreover, consumer prices will grow minimally or not at all this year with average inflation expected close to zero.

Growing private consumption will contribute to growth of retail trade and other sectors oriented on the domestic market. Growth will continue in manufacturing but its pace will largely depend on the situation in external environment - economic growth in the EU and economic situation in the CIS, the ministry said.

There will be moderate growth in construction which would accelerate when implementation of projects to be financed during the new EU programming period begins. Growth in the transport industry will be slow and would depend to a great extent on the geopolitical situation in the region.

The economic growth in 2016 will not be much faster than in 2015. The Economics Ministry expects the economic growth this year around 2.8 % but in 2017 the growth rate might exceed 3 % in case of favorable external developments.