Economic projections for Latvia revised by the Finance Ministry
The Bank of Latvia has recently adjusted its own economic forecasts, providing an update on the country's economic outlook for the coming years.
The most significant change is the increase in the inflation forecast for 2025, which has been raised to 3.5% due to a faster-than-expected increase in food prices and generally upward changes in heating tariffs. However, the economic growth forecast for 2025 has been reduced to 1.1%, a 0.1 percentage point decrease from the Ministry's early February prediction.
The reduction in the growth forecast is primarily due to increased uncertainty about economic growth in external markets and a slightly weaker performance of the Latvian economy in the first quarter of the year. This weakness is partly attributed to weather-related declines in the energy sector and a downturn in the healthcare sector.
The average wage growth forecast for 2026 has been raised to 6.0%, while the unemployment rate for 2025 is forecast at 6.9%, with a slight upward adjustment from previous predictions. The unemployment rate is expected to decrease to 6.3% in 2026. The forecast for the number of people employed in the economy has been slightly reduced due to the demographic situation.
The inflation forecast is expected to decline to 2.3% in 2026 and stabilize at 2.2% thereafter. Despite the slight increase in the unemployment rate, the Ministry believes the overall downward trend in unemployment will continue, with the rate potentially dropping to 5.4% by 2029.
The forecasts were developed under conditions of very high uncertainty. Among the most significant negative risks to the economic forecasts are trade tariff wars, geopolitical situation in the region, conflicts in the world, persistence of high inflation, and delays in the implementation of investment projects.
However, there are also positive risks, including the failure to materialize negative scenarios, the resolution of trade conflicts, and the cessation of hostilities in Ukraine. It's worth noting that the search results do not provide Latvia-specific revised macroeconomic forecasts or detailed factors influencing them like US tariffs or weather impacts through 2029.
For precise and updated forecasts for Latvia’s economy including growth, inflation, unemployment, and employment trends through 2029, and the key influencing factors like US tariffs and weather, consulting sources such as Latvia’s Central Statistical Bureau, the European Commission’s economic forecasts, IMF reports, or Baltic regional economic analyses would be necessary.
In the revised economic forecasts, the healthcare sector experienced a downturn, which partly contributed to the weakness observed in the Latvian economy during the first quarter of the year. Additionally, the Bank of Latvia anticipates fluctuations in the energy sector due to weather-related declines in the coming years.
Considering the uncertainty in US trade policies, weather conditions, and geopolitical situations, the search for detailed, Latvia-specific macroeconomic forecasts for sectors like finance, health care, energy, and others through 2029 would require consulting sources such as the Latvia Central Statistical Bureau, European Commission's economic forecasts, IMF reports, or Baltic regional economic analyses.
