Latvia's Economic Growth Declined During the First Quarter of 2025
In the first quarter of 2025, Latvia's economy showed promising signs of recovery, particularly in the construction and other sectors, according to the Central Statistical Bureau (CSB) and related analyses.
The construction sector witnessed a significant boost, with optimism reaching its highest level in over three years. This surge was underpinned by a nearly 16% increase in cement production in April compared to the previous year, suggesting a potential recovery in construction activity.
The manufacturing output also experienced a significant uptick, reaching its highest level since July 2023 in April 2025. This growth was broad-based across various sectors such as food, wood, textiles, machinery and equipment, and chemicals, indicating a strengthening industrial production.
Domestic demand also showed signs of recovery, with retail sales of non-food goods increasing by 3.6% year-on-year in real terms in early Q2. This suggests improving consumer confidence and spending, which indirectly supports sectors like construction and services through heightened demand.
Sentiment indicators such as industrial confidence, consumer sentiment, and construction sector optimism all rose notably, signaling growing positive expectations and activity in these sectors.
Despite these positive developments, Latvia's GDP contracted slightly in Q1 (-0.3%). However, these factors indicate early signs of recovery, especially in construction and manufacturing, buoyed by rising domestic demand and improved business confidence.
Other sectors like services also contributed positively, consistent with broader trends of growth led by services in the region.
It is worth noting that the CSB did not attribute the positive increase in value added from the information and communication services sector, accommodation, and financial and insurance activities to specific projects like Rail Baltica.
The decline in the production of electricity, gas, steam, and air conditioning had a negative impact on GDP in the first quarter, in addition to the previously mentioned construction sector. The GDP at current prices in Latvia for the first quarter of the year was EUR 9.1 billion.
In conclusion, while Latvia's economy contracted slightly in Q1, these factors show early signs of recovery, particularly in construction and manufacturing. The economy remains on a gradually improving trajectory despite past contractions and ongoing external uncertainties such as tariffs.
The surge in construction activity is strongly associated with the EU's business sector, as the nearly 16% increase in cement production in April indicates a potential recovery in construction activity, backed by optimism at its highest level in over three years. Additionally, the manufacturing industry in Latvia has experienced a significant uptick, supported by a strengthening industrial production across various sectors, which could potentially attract finance and investment opportunties in the region.
