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- The Latvian Economy - January 17, 2012
The Latvian Economy - January 17, 2012
17-01-2012 11:36
Strong export-driven investment growth in 2011
- Most of GDP growth in 2011 came from investments into fixed assets; e.g., in 9 months of 2011, such investment grew by 24.6% year on year (YoY), contributing 5 percentage points to the GDP growth of 5.4%. The growth came from investments in equipment and machinery, which rose by 63% YoY in the first 9 months of 2011, making up 42% of all nonfinancial investments. Meanwhile, investments in buildings and infrastructure (40% of all nonfinancial investments) increased by only 9%.
- The largest source of nonfinancial investments is companies’ own resources and loans. The rest is financed by EU structural funds. The largest part of foreign direct investment (FDI) was financial investment used to acquire existing real estate, and to strengthen banks’ balance sheets. Only 10% of FDI went into manufacturing.
- Over the next few years, the Latvian economy will remain export driven. We expect single-digit growth in gross fixed capital formation during 2012. Growth of private sector investments depends on exports and, thus, the situation in the euro zone, whereas that of public sector investments depends on the state budget situation and access to EU funds.
