Macroeconomic Review
October 2023


After the rapid recovery of the economy from the Covid-19 pandemic crisis in 2021, growth in Latvia slowed down to 3.4% in 2022. The economic development in 2022 was significantly affected by the supply chain disruptions caused by the Russian invasion of Ukraine, the rise in inflation caused by energy and food prices, as well as the decrease in global demand.

In 2023, the economic development continues to be affected by the geopolitical situation and uncertainty, high prices and rising bank interest rates. In Q1 of 2023, economic growth ceased. However, in Q2 of 2023, GDP already declined by 1.1% compared to the corresponding period last year. In the first half of 2023, GDP was 0.6% lower than a year ago.

It is anticipated that moderate growth rates will be observed in the second half of 2023. However, in 2024, the economy will start to grow slightly faster. The Ministry of Economy forecasts in 2023 GDP will remain close to 2022 levels. However, in 2024, GDP growth could reach 3%.

The further development of the economy in the medium term depends on the situation in the external environment and the progress of reforms. The largest risk to Latvia's growth is related to the development of the global economy, especially the geopolitical situation. The future development of the EU's common economic space is also important. Latvia's economic advantages in the medium term will mainly be based on the achieved macroeconomic stability, as a result of which Latvia's credit ratings have improved, as well as on the efficiency of the planned EU support programs and improvements in the business environment. As the war in Ukraine drags on, the pace of economic recovery could be slower.

Previous reviews and other publications on economic development can be found here ...