Macroeconomic Forecast Latvia

The economy grew by less in Q407 than previously thought. The national statistical agency has revised Q4 real GDP growth down to 8.0% y-o-y from 9.6%, resulting in full year growth of 10.2% rather than 10.7% as first estimated. The downward revision reflects weaker-than-estimated consumption growth, which decelerated to 4.4% y-o-y in Q4. Consumer spending remained weak in the early part of 2008 as evidenced by inflation-adjusted retail trade turnover of just 0.2% y-o-y in January-February. The economy ministry has revised its forecast for 2008 GDP growth to 7%; we forecast a more pronounced slowdown to 6.1% (with downside risks) led by private consumption and residential investment.

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