Analytics, Economics, GDP, Latvia

The FDP notes that the economy will return to a turbulent zone in the coming months, affected by the economic and social tensions associated with Covid-19.

"The current stabilization of economic indicators in the third quarter, as well as in the data available for the last quarter, suggests that this year's economic performance will remain higher than previously projected. However, very clear government signals to the public about support measures are needed," said the FDP.

In the Council's view, the deteriorating economic sentiment suggests a downturn in the first quarters of 2021.

Analyzing the economic indicators, the FDP noted that in the third quarter of this year, several positive signals were observed in the economy - a decrease in the unemployment rate, a return to manufacturing capacity of enterprises similar to that of the beginning of the year and a resumption of export growth.

"The negative factors affecting the economy are the relatively stable deflation, which has been continuing since August, the decline in economic sentiment and sentiment indicators both in Latvia and in trading partner countries, as well as the very weak performance of services exports, which has been going on since the second quarter," FDP said.

Analyzing tax revenues, the FDP informed that tax collection remains stable and that the effect of the second Covid-19 wave has not yet been felt. The budgetary impact of state aid measures is estimated at EUR 1.7 bn, or about 6.2% of gross domestic product (GDP) in 2020.