According to the Central Statistical Bureau’s (CSB) quick assessment of gross domestic product, in Q4 2022, gross domestic product (GDP) at constant prices remained at the level of Q4 2021 (unadjusted data). According to CSB’s preliminary estimates, in Q4 of the last year, GDP was affected by a 3.3% drop in manufacturing sectors and a 0.7% increase in services sectors. This means that last year overall GDP grew by 1.8 percent.

Although GDP data for Q4 of the last year are modest, the situation is even slightly better than expected. Given that in Q3 last year, economic activity shrank by 1.7% compared to Q2 (seasonally adjusted data), due to high inflation the situation was expected to continue to deteriorate also at the end of the year, with price growth rates outpacing wage growth, resulting in a reduction in real income and purchasing power of the population. However, the quick assessment of gross domestic product shows that GDP increased by 0.3 per cent in Q4 2022 compared to Q3 (seasonally and calendar adjusted data).

In Q4 of last year, the decline in manufacturing sectors (by 3.3%) was most likely underpinned by trends in the construction sector, which was negatively affected by the rapid increase in costs and the appreciation of project costs. Monthly data show that in October-November 2022, volumes of mining, electricity and gas supply at constant prices also shrank year-on-year. At the same time, in October-November production volumes in manufacturing were 2% higher than in the corresponding time period a year ago.

The economic growth indicators were also negatively affected by foreign trade and a rapid increase in imports. Last October-November, imports of goods at current prices were 31% higher than in the corresponding months in 2021. At the same time, exports of goods increased much more moderately – by 18 percent.

There is still considerable uncertainty as to how Russia’s war in Ukraine and related sanctions will affect the future development of Latvia’s economy. The uncertainty will affect the consumption of the population, investment of businesses, and foreign trade. The most difficult situation in the economy is expected in the first months of this year. Economic growth could return in mid-2023, but in 2023 GDP will generally remain close to the volumes of 2022.