Analytics, Baltic States – CIS, Economics, Latvia, Markets and Companies

This past March, SEB banka said it expected Latvia's economic growth to reach 2.9% this year and 3.4% in 2015.

The bank's study says that Russia's sanctions will impede Latvia's economic growth, but not as much as to halt it altogether. The direct impact of the sanctions is rather limited, although indirectly they affect a number of economy sectors. Those sectors to which the Russian market was the main sales market will suffer losses. Adapting to the new circumstances will take time and require state support. Latvia's export volumes are relatively small, which means that companies should not run into major problems while trying to find alternative markets. Companies' profitability is likely to suffer the most, says the review.

The bank's economists point out that further developments will be of crucial importance. Taking into consideration the effect that sanctions will have on Russia itself, it is quite likely that the sanctions will actually work differently, or exceptions will be made, as a result of which several companies will be able to continue to export their products to Russia. This will be a period of great uncertainty for practically all business sectors that are associated with the Russian market.

In the meantime, the construction sector is going through a period of strong growth, and turnover in retail trade also moderately increased in the second quarter, notes the bank's report.

As reported, Latvia's GDP increased 2.6% in the first half of the year.

Swedbank also cut Latvia's economic growth forecast to 2.5% this year. In 2015, Latvia's economic growth could increase by 2.6%. In 2016, Latvia's gross domestic product could increase by 3.5%, the bank said.