Latvian GDP shrank 19% in third quarter
09.12.2009, 15:34Latvia’s economy contracted the most in the European Union in the third quarter as consumer spending collapsed and manufacturing declined, Statistics Latvia said today.
Bloomberg reported that gross domestic product shrank 19%, compared with a preliminary estimate for a 18.4% decline released on Nov. 9, and an 18.7% slump in the second quarter.
Latvia, which had the fastest-expanding economy in the EU in 2006, has been the worst hit of the 27-member bloc as its spending and property boom turned into bust, exacerbated by the global crisis.
“The main reason for Latvia’s economic downturn still is and remains domestic private consumption,” said Zigurds Vaikulis, an economist at Parex Asset Management in Riga. GDP may fall between 13% and 15% from a year ago in the fourth quarter, he said, estimating next year’s decline at 2% to 3%.
Industrial production grew 0.5 percent in the third quarter, compared with the second quarter on a seasonally adjusted basis, though it fell 15 percent compared to the third quarter a year ago, on a work-day adjusted basis. Retail sales fell 6.7 percent in the third quarter, compared with the second quarter on a seasonally adjusted basis. It fell 30 percent compared with the third quarter a year ago, on a work-day adjusted basis.
“The largest drop was in domestic demand, and government spending is shrinking faster than previously” after the country adopted a supplementary budget in June, said Martins Kazaks, chief economist at Swedbank’s Latvian unit. Fourth-quarter GDP may shrink an annual 17.5% and for all 2009 the contraction may be about 18 percent, he said.
The economies of Estonia, Latvia and Lithuania are shrinking at a slower pace on a quarterly basis. Lithuania posted growth of 6.1% in the third quarter compared with the previous three-month period.
The Latvian economy, which has shrunk six consecutive quarters, is expected to start growing in the second half of 2010, according to central bank estimates.