Technical recession is just around the corner - Swedbank

Published date28 July 2022
Publication titleLETA

RIGA, July 28 (LETA) - Economic growth in the second quarter slowed down compared to the beginning of the year, and most likely technical recession, which means two consecutive quarters of negative growth, is just around the corner, Swedbank's acting chief economist Agnese Buceniece told LETA.

s reported, in the second quarter of 2022 Latvia's seasonally and calendar unadjusted gross domestic product (GDP) grew by 2.6 percent against the same period a year ago, according to a flash estimate released by the Central Statistical Bureau (CSB) on Thursday. In the first quarter, Latvia's GDP increased 6.7 percent year on year. Compared to the first quarter of 2022, Latvia's seasonally and calendar-adjusted GDP decreased by 1.4 percent.

ccording to Buceniece, the main reasons for slower growth include high prices, shortages of certain production components, delays in deliveries and increasing uncertainty. These circumstances have been facilitated by Russia's invasion of Ukraine, sanctions against Russia and Belarus, Russia's response measures and, partly, the consequences of the pandemic.

Preliminary estimates suggest that Latvia's economic growth was affected by a drop of 0.4 percent in producing sectors and growth of 4.1 percent in services sectors, the CSB said. Despite various supply challenges and early signs of declining demand, manufacturing output continued to grow in April and May. This was also reflected in increasing exports of goods.

However, in other industrial sectors - mining industry and electricity and gas supply - a decline was recorded in the second quarter. Most likely, the decline was mainly determined by decreasing construction volumes, said Buceniece.

On the other hand, growth in services sectors continued, but slowed down from around 7 percent in the first quarter to 4.1 percent in the second quarter. The rising cost of living and the related decline in purchasing power had an adverse effect on sales volumes in the retail sector and consumption.

Compared to 2021, retailers are doing better this year, but the general trends over the past few...

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