Published: 16.04.2023.

Macroeconomic Review
April 2024

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After the rapid recovery of the economy from the Covid-19 pandemic crisis in 2021, growth in Latvia slowed down to 3% in 2022. The economic development in 2022 was significantly affected by supply chain disruptions caused by Russia's invasion of Ukraine, the rise in inflation caused by the cost of energy resources and food, as well as the decrease in global demand.

In 2023, economic development continued to be affected by the geopolitical situation and uncertainty, high prices and rising bank interest rates. GDP decreased by 0.3%. In the second half of the year, the GDP decline was higher than in the first half of the year. In Q4 of 2023, compared to Q4 of 2022, GDP declined by 0.5%. In general, private consumption, export and import decreased in 2023, albeit public consumption and investments increased.

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%.

In 2024, the economy will start to grow at a higher pace. International institutions forecast that the economy will grow in Latvia's largest export markets in 2024, which will positively affect the country's export opportunities. As real wages resume growth, private consumption is anticipated to resume growth as well. The implementation of EU fund programs will have a positive impact on investment dynamics. The Ministry of Economics forecasts that GDP growth could reach 1.8% in 2024.

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 ...