Latvia: Cyclical upswing amid first reforms

Robust exports and consumer spending

The Latvian economy is set to grow +4.4% in 2017, after a mere +2% in 2016. GDP growth has become broad-based. It was driven by strengthening exports (cyclical upswing in EU countries and Russia), a rebound in investment (EU structural fund transfers), as well as robust consumer spending bolstered by sound wage growth. While exports and private consumption (e.g. thanks to a higher minimum wage) should remain strong in 2018, investment expansion will slow down, contributing to somewhat slower GDP growth. However, geopolitical risk related to Russia could undermine the currently positive export dynamics. ​