Economic growth rises in the third quarter of 2025

GDP growth hits two-and-a-half-year high: Latvia's GDP expanded 2.5% in annual terms in Q3, following 0.9% growth in the prior quarter. Q3's reading was the strongest since Q1 2023 and outpaced both market expectations and the euro area average of 1.3%. On a seasonally adjusted quarter-on-quarter basis, GDP increased 0.6% in Q3, following 0.3% growth in the previous quarter.

Domestic demand underpins growth: Compared with the previous quarter's data, readings in Q3 improved for private consumption (+1.8% in annual terms vs +0.1% in Q2), government consumption (+5.8% vs +3.2% in Q2), fixed investment (+10.8% vs +9.0% in Q2) and exports of goods and services (+3.0% vs -0.2% in Q2). However, the reading for imports of goods and services softened slightly in Q3 (+5.8% vs +5.9% in Q2).

Panelist insight: EIU analysts said: “The third-quarter data were sufficiently positive to enable us to revise up our estimate for economic expansion in 2025. Looking further ahead, we also now believe that the impact of US import tariffs will be less severe than we had expected, following the US reaching deals with the EU and other trading partners. As a result, we have revised up our forecast for US GDP growth in 2026 and we have also lowered our oil price forecast for the same year. These factors should help Latvia by raising export demand, freeing up company and household spending, and moderating consumer price inflation next year. Consequently, we will revise up our forecast for Latvia's GDP growth.”

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