Latvijas Banka (LB), the Latvian central bank, published revised macroeconomic forecasts on December 19th, and the good news is that economic growth is projected to be slightly better than previously forecast.
Gross domestic product (GDP) is expected to grow by 1.7% this year. In its June forecasts, GDP growth was expected to be just 1.2%. However, a year ago in December, 2024, the central bank had predicted 2.1% growth for 2025.
“Further economic recovery will be driven by investment, increasingly strong private consumption, and exports,” the central bank predicted today. “The future outlook remains broadly unchanged; however, with adjustments to the implementation prospects of some major investment projects, faster growth is expected in 2028 rather than in 2027.”
Nevertheless, LB offered some cautious optimism, adding “In the coming years, the situation will improve as both domestic and external demand strengthen. Thus, GDP is expected to grow by 2.8% in 2026, 2.9% in 2027, and 3.2% in 2028.”
However, inflation projections have also been revised upwards. “The inflation data exceed the June forecasts, and wage growth is higher than previously expected; therefore, Latvijas Banka has revised the inflation forecast for 2025 upwards to 3.9%,” the central bank said. The June forecast was 3.4% and a year ago it was predicted to be just 1.4%.
“Inflation is projected to stand at 3–4% in the next three years (3.2% in 2026, 2.9% in 2027, and 3.6% in 2028),” the central bank suggested.
Macroeconomic fundamentals: Latvijas Banka’s forecasts
2025
2026
2027
2028
Economic activity
(annual change, %)
GDP
1.7
2.8
2.9
3.2
Private consumption
0.6
3.0
3.1
3.1
Government consumption
2.0
0.2
1.2
1.7
Investment
9.9
4.0
2.2
6.2
Exports
1.2
4.0
2.8
2.8
Imports
5.7
3.1
2.2
3.3
HICP inflation
(annual change, %)
Inflation
3.9
3.2
2.9
3.6
Core inflation (excluding food and energy prices)
3.5
4.0
3.3
3.5
Labour market
Unemployment (% of the economically active population; seasonally adjusted data)
6.9
6.6
6.4
6.2
Nominal gross wage
(annual change; %)
8.0
7.6
7.6
7.9
External sector
Current account balance (% of GDP)
–3.2
–3.5
–3.2
–3.5
Government finances (% of GDP)
Budget surplus/deficit
–2.7
–3.5
–3.5
–3.1
General government debt
48.4
49.4
50.8
50.8
NOTE: The cut-off date for the information used in the forecast was 3rd December 2025, and 26th November 2025 for information used in some technical assumptions.
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