Latvia’s GDP Rises by 0.8% in 1st Quarter of 2023 Compared to Previous Year, Driven by Growth in Construction and Information Sectors

June 3, 2023

Data compiled by the Central Statistical Bureau (CSB) shows that in the 1st quarter of 2023, compared to the 1st quarter of 2022, gross domestic product (GDP) rose by 0.8 % (according to seasonally and calendar non-adjusted data at constant prices). As compared to the previous quarter, GDP went up by 0.6 % (according to seasonally and calendar adjusted data at constant prices).

In the 1st quarter GDP at current prices was EUR 9.1 billion.

In the 1st quarter of 2023, as compared to the corresponding period of the previous year, changes in total value added (rise of 0.7 %) were affected by an increase of 1.2 % in services sectors and reduction of 0.1 % in producing sectors.

The activity of the agricultural sector was assessed with a growth of 1.8 % (of which, increase of 3.8 % in crop production, and of 0.6 % in livestock production). Increase in fishery was 9.4 %, but drop in forestry and logging sector comprised 6.9 %.

For the third consequent quarter a drop was observed in manufacturing – by 4.3 %. It was affected by a reduction in the largest manufacturing sector – manufacture of wood and of products of wood by 11.1 % (mainly in sawmilling and planing of wood; impregnation). Different trends can be observed in other important manufacturing sectors – increases in manufacture of food products (by 5.3%), in manufacture of electrical equipment (18.4 %), in manufacture of computer, electronic and optical products (55.8 %), as well as in manufacture of pharmaceutical products and preparations. While a decrease is observed in manufacture of other non-metallic mineral products (of 19.3 %), manufacture of chemicals and chemical products (24.9 %), manufacture of fabricated metal products (10.0 %), as well as manufacture of rubber and plastic products (6.3 %).

Despite the increase in water supply, sewerage, waste management and remediation activities (of 6.0 %), there was a drop in other industry (4.5 %), which was affected by a fall of 8.2 % in electricity, gas, steam and air conditioning supply as well as of 25.3 % in mining and quarrying.

After a long period of decline, a significant rise (of 17.0 %) was observed in the development of construction sector. In all three construction sub-sectors there was an increase: construction of buildings rose by 25.2 %, work carried out in civil engineering – by 6.3 % and specialized construction work carried out – by 13.1 %.

There was a drop in trade of 10.3 %, which was significantly affected by a fall in wholesale trade of 27.3 %. Positive contribution to the development of trade was reached by rise in trade and repair of motor vehicles and motorcycles (by 22.7 %). In retail trade a decrease (of 1.4 %) was affected by the drop in retail sale of food products by 5.5 % and rise in retail sale of non-food products by 0.9 %.

Fall in transport and storage sector (of 4.7%) was negatively affected by a drop of 5.7 % in land and pipeline transport activity, of 4.0 % in water transport sector, of 6.2 % in warehousing and support activities for transportation, as well as of 3.5 % in postal and courier activities. In turn positive contribution to the development of transportation and storage sector was reached by rise in air transport (by 66.2 %).

The largest positive impact on the growth of total value added was ensured by information and communication sector (rise of 12.2 %), which was promoted by the rise in volume of provision of information services by 14.0 % as well as of computer programming and consultancy sector (by 19.0 %), in turn a drop is observed in provision of telecommunication services (by 0.7 %).

The decrease in financial and insurance activities in the amount of 3.9 % was determined by the financial service activities and activities auxiliary to financial services and insurance activities – reduction of 3.6 % and 14.1 %. On the other hand, insurance, reinsurance and pension funding experienced rise of 7.8 %, where there was a rise in gross premiums written in non-life insurance and a drop in gross claims paid in private pension funds.

Rise of 2.6 % in professional, scientific and technical activities was promoted by growth in legal and accounting activities (of 10.0 %), other professional, scientific and technical activities (5.8 %), provision of architectural and engineering activities (3.3 %); activities of head offices, management consultancy activities and advertising and market research remained at the level of the previous year. A negative impact on the sector’s development can be seen in the provision of advertising and market research – a drop of 3.2 %.

Administrative and support service activities show a steady growth – an increase of 7.2 %. The largest positive impact on the development of sector was observed in security and investigation activities – a rise of 15.2 %, in office administrative activities (14.9 %), in building maintenance and landscape architectural services (14.3 %), in travel agency, tour operator reservation services (8.8 %). A negative impact on economic development in the 1st quarter was in labour recruitment and provision of personnel – a drop of 4.9 %.

The volume of taxes on products increased by 3.1 % in the 1st quarter of this year, of which income from value added tax rose by 4.2 %, but excise tax revenues – reduced by 0.2 %.

Expenditure approach

(at constant prices, seasonally and calendar non-adjusted data)

In the 1st quarter of 2023, compared to the corresponding period of the previous year, total household expenditure rose by 0.4 %. Expenditure on food products purchased both in retail sale and in e-environment decreased by 5.1 %. In terms of the amount of services used, expenditure on housing, water, electricity, gas and other fuels decreased by 15.5 %, which was mainly affected by the relatively warm winter. Significant increase was observed in household expenditure on recreation and culture (rise of 14.1 %), as well as expenditure on restaurants and hotels went up by 18.0 %, which was partially affected by the low base effect, because indicators of the 1^st quarter of 2022 were still affected by restrictions of COVID-19. Households spent 6.7 % more on transport (public transport, purchase and exploitation of transport vehicles).

Government final consumption expenditure grew by 6.9 %.

Investment in gross fixed capital formation rose by 11.3 %, of which investment in dwellings, other buildings and structures has grown by 17.0 %. Investment in machinery and equipment, of which in transport vehicles – increased by 4.9 %. Investment in intellectual property products (research, computer software, databases, copyrights, etc.) – grown by 4.3 %.

Exports of goods and services fell by 0.7 %, of which exports of goods – by 2.3 %, and exports of services – rose by 4.0 %. The main commodities in exports were wood and products of wood (except furniture), mineral products and electrical machinery and equipment. In the 1st quarter of 2023 the largest service exports groups were transport services and other economic activity as well as computer services.

Imports of goods and services grew by 3.1 %, of which imports of goods by 0.1 % and imports of services by 19.1 %. Mainly mineral products and electrical appliances and electrical equipment are imported. Services imported the most were transport services and other economic activity.

Income approach

(at current prices, seasonally and calendar non-adjusted data)

Compared to the 1st quarter of 2022, in the 1st quarter of 2023 compensation of employees increased by 15.2 % (both wages and salaries as well as employers’ social security contributions rose by 15.2 %.

The largest growth in total compensation of employees was in agriculture, forestry and fishing sector (29.5 %), in the group of wholesale, retail trade; repair of motor vehicles and motorcycles; transportation and storage; accommodation and food service sectors (18.5 %) and in financial and insurance activities (18.3 %). Compensation of employees in services sectors has risen on average by 15.5 %, compared to the corresponding period of the previous year.

Gross operating surplus and mixed income increased by 2.3 %, and taxes on production and imports less subsidies rose by 12.2 %.

Source: Central Statistical Bureau (CSB)
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