Translated using ChatGPT service.
In the second quarter of this year, gross domestic product (GDP) at constant prices was 1.7% higher than a year ago, marking the fastest growth since the end of 2023. Overall, in the first half of the year, GDP increased by 0.7% compared to the same period of the previous year. Given the tense geopolitical situation, this GDP growth is assessed positively.
Household consumption in the second quarter decreased by 0.3% compared to the same period last year. Consumer caution has been influenced by high price levels, inflation expectations, and geopolitical uncertainty.
A sharp increase was observed in investments. This has been driven both by faster absorption of EU funds and the activation of lending for private sector financing. For example, in July 2025, compared to the same period last year, the volume of loans increased by 8.7%, including a 14.3% increase for private non-financial corporations (EUR 701.8 million). Gross fixed capital formation rose by 8.6% year-on-year, mainly due to a 7.1% increase in construction and buildings and a 13.9% increase in investment in machinery and equipment, including transport vehicles. Investment in intellectual property products increased by 0.2%.
Exports of goods and services rose by 2.3%. Although the external environment has slightly improved, it remains weak due to geopolitical uncertainty. The increase in goods exports was primarily driven by higher exports of wood and wood products (excluding furniture), electrical appliances and equipment, and mineral products. Goods exports increased by 1.7%. Growth in services exports was driven by transport services and other business activities (research and development, professional services, technical, trade-related, and other business services), with services exports increasing by 3.5%.
Imports increased by 7.1% in the second quarter of this year. The main imported goods were mineral products, electrical appliances and equipment, and land transport vehicles and parts. Goods imports rose by 6%, while services imports increased by 11.4%, mainly due to higher transport services and other business services.
Several sectors contributed significantly to Latvia’s GDP growth in Q2 2025. A key growth driver was manufacturing, particularly food production and non-metallic mineral products. The construction sector grew overall by 4.5%, with the fastest increase recorded in civil engineering (+27.7%). Trade provided a stable contribution to economic development, while the information and communication technology sector grew by 3.7%, including in software programming and telecommunications. Financial and insurance activities increased by 4.6%, particularly driven by growth in the insurance and pension accumulation segment (+14.9%). Accommodation and food service activities grew by 3.4%, reflecting rising demand in the sector.
The largest declines were observed in mining and quarrying, where value added decreased by 18.8%. Significant declines were also seen in water supply, sewerage and waste management (-5.6%) and in health and social care (-3.3%). In agriculture, value added fell by 3.2%, and in the transport and storage sector by 1.8%, reflecting weakening activity in logistics. A small negative contribution was also recorded in administrative and support service activities (-1.2%).
Latvia’s economic growth in Q2 2025, despite the complex geopolitical situation, has been positive—GDP growth of 1.7% reflects the resilience of the economy. The main growth drivers were increased investment, especially in construction and machinery/equipment, as well as rising export volumes. However, the decline in household consumption indicates cautious behavior by residents due to high prices and inflation expectations, which may limit domestic market development. By sector, positive contributions came from construction, education, financial and insurance activities, as well as ICT and trade, while challenges remain in transport and storage and agriculture. The Ministry of Economics projects that overall GDP growth in 2025 will reach 1.6%.
Prepared by:
Analytical Department, Ministry of Economics
Ekonomikas ministrs Viktors Valainis:
“IKP dinamika 2025.gada 1.pusgadā rāda, ka Latvijas ekonomika ir atsākusi pieaugt. To sekmē gan nedaudz straujāka izaugsme mūsu galvenajās tirdzniecības valstīs, gan arī valdības ekonomikas veicināšanas pasākumi, īpaši kreditēšanas un investīciju jomā. Banku solidaritātes nodokļa ieviešana ir mudinājusi kredītiestādes aktīvāk iesaistīties ekonomikas vajadzību finansēšanā, kas papildus tautsaimniecībā gada laikā ir nodrošinājis finanšu resursus 1,2 miljrd. EUR apmērā, no tiem aptuveni 700 milj. EUR uzņēmējdarbības vajadzību finansēšanai. Tāpat īpaši priecē apstrādes rūpniecības, būvniecības un tirgus pakalpojumu dinamika. Prognozējam, ka ekonomika turpinās augt arī turpmāk. Par to liecina uzņēmēju noskaņojuma radītāji, plānotās investīcijas. Tāpat, privātais patēriņš pamazām atkopjas no augstās inflācijas. Darba algas un nodarbinātībās rādītāji rāda pozitīvas tendences.”