Latvian banks have revised down their GDP growth forecasts for the country, largely due to the ongoing conflict in the Middle East affecting energy prices.
The Latvian economy is expected to grow at a slower pace than previously anticipated, with Luminor Bank revising its GDP growth forecast for 2023 from nearly 3% to 2.5%. In light of geopolitical tensions and potential blockades in the Strait of Hormuz, the forecast could further dip to as low as 1.8%, according to economist Pēteris Strautiņš.
In a similar vein, Citadele Bank has also adjusted its outlook, predicting a GDP growth of only 1.8% by 2026, which is a decrease of 0.2% compared to earlier estimates made in December. The adjustments highlight how external factors, particularly energy prices influenced by the conflict in the Middle East, are playing a significant role in shaping economic forecasts for Latvia.
Swedbank economist Līva Zorgenfreija pointed out that overall economic growth for Latvia is expected to be slower than earlier forecasts, now at 2.3%. The increasing energy costs, stemming from the ongoing war in the region, are likely to have a negative impact on inflation, further complicating the economic landscape in Latvia.
