A flash estimate of Latvia's economic growth in the first three months of 2016 suggests that the Baltic country's economy is still in a rather volatile phase, with external factors strongly affecting its growth, the Finance Ministry said Friday.
The year started off with weak economic growth, the ministry said, commenting the national statistics office's flash estimate, which shows that Latvia's GDP grew by 1.8 percent year-on-year in the first quarter of 2016.
The Latvian manufacturing industry surprised with significant fluctuations at the beginning of this year, as the sector's output dropped 2.9 percent in annual terms in January, but jumped 4.3 percent year-on-year in February, the Finance Ministry said.
The Latvian food industry also contracted 5.8 percent in January because of the Russian market's issues, and rebounded 5.2 percent in February, Meanwhile, industries less reliant on the Russian market showed great performance at the beginning of 2016. The timber industry, for instance, expanded 9.2 percent in January and 11.2 percent in February.
Cargo shipping through Latvian port and by rail has also been slowing due to Russia's economic situation and sanction, as well as weakening demand for coal and a low oil price, among other factors. Cargo shipping by rail fell 20.6 percent during the first quarter of 2016, and Latvian ports reported a 14.1 percent reduction in cargo turnover.
Affected by geopolitical issues, Latvian exports of goods slowed 10.9 percent year-on-year in January and 1.2 percent in February, although imports declined as well, reducing the negative effect of the export drop on GDP, the ministry said.
Private consumption, which has been driving Latvia's economic growth in recent years, is feared to have slowed in the first months of 2016.
Although consumer sentiment remained fairly stable and wages kept climbing (growing by some 5 percent), Latvian retail sales increased by just 2.3 percent in the first quarter of 2016, as compared to 5.4 percent growth a year ago.
The construction sector was another cause for concern, as its output fell 22 percent in the first quarter of 2016 because of delayed EU funding, the Finance Ministry said.
The ministry noted, however, that on the whole, Latvia's situation was not worse than in other EU member states, although the bloc's growth forecasts have been constantly downgraded this year.