The quarterly decline in the Latvian economics has continued for the second quarter successively. According to preliminary data of the Central Statistical Office in the 1st quarter of 2016 the GDP of the country reduced yet by 0.1%. The chief culprits – delay in implementation of EU funds and transit problems.
Decline in the gross domestic product (GDP) of Latvia, recorded for two successive quarters, forces to speak of a technical recession in economics. But, it is still early to panic.
Despite the quarterly decline, in a year’s perspective the economics is growing, although slower than in the previous quarters. The annual growth rates of GDP of Latvia in the 1st quarter of 2016 made up 1.8% (seasonally non-aligned data).
The economic growth rates in the first quarter of this year to a great extent are attributable to slowdown in January. But in the following months the situation somewhat bettered.
So, the manufacturing output in January shrank by 5.2% if compared to the same month the year before. But, in general, for the quarter this sector showed a growth of 0.5% over the previous year. Something like that was observed also with export in 2016. In actual prices in January its volume decreased by 10.9%, while in February it remained just about at the level of February last year.
The situation in transport also looked not as much gloomily as it might have. Indeed, in the first months the volumes of freight carried by railway and through the ports noticeably reduced. But, in general, in the sphere of transport and storage the amount of services in the first quarter this year showed a growth of almost 3%.
Although at slightly slower rates than the year before, the growth of the retail trade turnover continued. It suggests that private consumption continues growing this year as well. In the first quarter the retail trade turnover showed a growth of 1.3% over the previous year. Generally speaking, however, the amount of services provided in this sphere grew in the first quarter by 2.3%.
In general, the economic growth in Latvia this year, presumably, would gain some momentum if compared to 2015 and might show about 3%.
Experience of our northern neighbours evidences in favour of this forecast. In Estonia in 2013 at the start these data showed a slight recession. As it often happens, the GDP data were revised, and by now they do not show any recession for the time being.
There are, however, the reasons for anxiety. Clearly, implementation of EU funds will not begin until the last quarter this year, but the manufacturing industry is being adversely affected by the suspension of operations of Liepājas metalurgs.