Latvia Economy Exits Recession in Q2

The economy of Latvia expanded by 2.5% year-on-year in the third quarter of 2025, accelerating from a downwardly revised 0.9% growth in the second quarter This marked the fifth consecutive quarter of growth and the fastest pace since the first quarter of 2023. Sharp increases were seen in household consumption (1.8% vs 0.1% in Q2), government spending (5.8% vs 3.2%), and gross fixed capital expenditure (10.8% vs 9.0%). However, net trade contributed negatively to the GDP, as exports (3.0%) rose less than imports (5.8%). On the production side, the strongest contribution came from manufacturing (7.3% vs 3.6%), construction (9.0% vs 5.8%), trade (3.1% vs 2.7%), and real estate activities (3.0% vs 2.1%). On a seasonally adjusted quarterly basis, GDP rose by 0.6% in the September quarter, following a downwardly revised 0.3% increase in the previous period.

The economy of Latvia rose by 1.7% year-on-year in the second quarter of 2025, contrasting with the preliminary estimate of a -0.3% decrease and following a 0.3% fall in the previous period. This marked the first quarter of expansion after three consecutive quarters of contraction as output increase in gross capital formation (22.3%) and government spending (2.0%). Meanwhile, household consumption declined (-0.3%). In terms of net external demand, imports (7.1%) rose much faster than exports (2.3%). On a seasonally adjusted quarterly basis, the economy increased by 0.4% in Q2 2025 from 0.1% in the previous three-month period.

Latvia’s economy contracted by 0.3% year-on-year in the first quarter of 2025, slowing from a 0.4% drop in the previous three-month period. This marked the fourth consecutive period of contraction but the softest pace in the sequence, as gross capital formation (18.8%) and government spending (2.2%) increased. Meanwhile, household consumption (-1.1%) declined. In terms of net external demand, imports (7.8%) rose much faster than exports (2%). On a seasonally adjusted quarterly basis, the economy contracted by 0.1% in Q1 2025, following a downwardly revised flat reading in the previous three-month period.