According to Central Statistical Bureau data, GDP at comparable prices in the second quarter of this year was 0.5% higher than a year earlier. By way of comparison, GDP fell in the last three quarters of 2023, but rose by 0.1% in the first quarter of this year. Given the still tense geopolitical situation, the modest rise in GDP in the second quarter of this year should be viewed positively and indicates that the economic situation is gradually beginning to improve.

Price growth rates are more moderate than wage growth, strengthening household purchasing power. Household consumption continues to increase – in the second quarter, private consumption was 0.5% higher than a year earlier.

Government consumption continues to grow – in the second quarter it rose by 8.5% year on year. The decline in investment continued, albeit more moderately than in the first quarter. Gross fixed capital formation fell by 5.7% year on year. Investment in dwellings, buildings and structures fell by 1.5%, while investment in machinery and equipment declined, including a 9.5% drop in transport vehicles. Investment in intellectual property products fell by 8.8%.

Export volumes of goods and services continue to be affected by unfavourable conditions in external markets. In the second quarter, exports were 3.4% lower than a year earlier. The larger decline was in services exports, at 6%. Goods export volumes shrank by 2.4% in the second quarter. The main export goods were wood and wood products, mineral products, and electrical appliances and equipment. Import volumes in the second quarter of this year were also lower than a year earlier. In the second quarter of this year, imports fell by 2.9%.

By sector, total value added fell by 0.1% in the second quarter compared with the second quarter of last year. Service sectors saw growth of 0.5%, while production sectors saw a decline of 1.4%. In contrast to the situation in the first quarter, the second quarter already saw growth in several private sector industries – in information and communication services, in professional, scientific and technical services, and in accommodation and food services.

The rate of decline is also slowly easing in manufacturing. The fall in manufacturing was mainly driven by declines in wood processing (-0.8%), the manufacture of metal products (-7%) and the manufacture of electronic and optical equipment (-11.2%). Positive trends, meanwhile, can be seen in food production (+2%), the manufacture of chemicals and chemical products (+12.2%) and the manufacture of non-metallic mineral products (+5.1%). In the construction sector, following a sharp rise in volumes in 2023, output fell by 1.5% in the second quarter of this year.

In the service sectors overall, output in the second quarter of this year rose by 0.5% compared with the second quarter of 2023. Growth was seen in the ICT sector (+5.6%), education (+6.7%), health and social care (+6.5%), as well as in retail trade, including the retail sale of non-food goods (+1.2%) and volumes of automotive fuel sold (+3.8%).

Geopolitical uncertainty and weak external demand are expected to continue to affect economic development. Nevertheless, growth rates will most likely pick up in the second half of the year. The Ministry of Economics forecasts that GDP could grow by around 1% in 2024 as a whole.

https://www.em.gov.lv/lv/jaunums/situacija-ekonomika-pamazam-sak-uzlaboties