Latvia’s November 2025 Current Account: A Mixed Signal Amid Global Uncertainty
Table of Contents
Latvia’s current account surplus for November 2025 registered at €352.30 million, according to the Sigmanomics database, significantly below the €730 million forecast and down from €522.20 million in October. This contraction follows a volatile year marked by swings from a deficit of €120.90 million in September to a peak surplus of €475.90 million in August. The current reading remains positive but signals a moderation in external balances amid shifting global trade and financial conditions.
Drivers this month
- Weaker export growth due to subdued demand in key EU markets.
- Rising import costs linked to energy price volatility.
- Reduced net income inflows from abroad compared to previous months.
Policy pulse
The current account remains supportive of Latvia’s external stability but at a diminished margin. The narrowing surplus aligns with the European Central Bank’s ongoing monetary tightening, which dampens trade financing and investment flows. Inflationary pressures and higher interest rates are expected to moderate external demand further.
Market lens
Immediate reaction: The EUR/LTL exchange rate showed mild depreciation pressure, with the litas weakening 0.15% within the first hour post-release. Bond yields edged higher, reflecting cautious investor sentiment amid the softer external balance.
Core macroeconomic indicators underpinning Latvia’s current account reveal a complex interplay of domestic and external factors. GDP growth for Q3 2025 held steady at 2.10% YoY, while inflation remained elevated at 4.30% YoY, driven largely by energy and food prices. Unemployment edged down to 6.20%, supporting consumption but also increasing import demand.
Monetary Policy & Financial Conditions
The ECB’s recent rate hikes, cumulatively 125 basis points since mid-2025, have tightened liquidity conditions. This has increased borrowing costs for Latvian exporters and importers alike, constraining trade volumes. The Sigmanomics database shows a correlation between rising short-term yields and the contraction in the current account surplus over the past three months.
Fiscal Policy & Government Budget
Latvia’s fiscal stance remains moderately expansionary, with a 2025 budget deficit forecast of 1.80% of GDP. Increased government spending on infrastructure and social programs has supported domestic demand but also contributed to higher import volumes, partially offsetting export gains.
External Shocks & Geopolitical Risks
Heightened geopolitical tensions in Eastern Europe and energy supply uncertainties have disrupted trade routes and increased costs. These shocks have pressured Latvia’s trade balance, particularly in energy imports, which surged 14% YoY in Q3 2025.
Trade in goods remains the largest component, with exports growing 3.50% MoM in October but slowing sharply in November. Imports rose 2.80% MoM, driven by energy and intermediate goods. Net services and income flows have also moderated, contributing to the narrower surplus.
This chart reveals a current account trending downward after a mid-year peak, signaling emerging headwinds from external demand and cost pressures. The reversal suggests Latvia’s external sector is vulnerable to tightening financial conditions and geopolitical risks, warranting close monitoring in coming months.
Market lens
Immediate reaction: EUR/LTL depreciated 0.15% post-release, reflecting market concerns over the reduced surplus. Sovereign bond yields increased by 5 basis points, indicating heightened risk premiums amid uncertainty.
Looking ahead, Latvia’s current account trajectory depends on several key variables. The Sigmanomics database suggests three scenarios for the next quarter:
- Bullish (30% probability): Global demand recovers, energy prices stabilize, and export growth accelerates, pushing the surplus above €600 million.
- Base (50% probability): Moderate growth with continued ECB tightening and geopolitical tensions keeps the surplus near €350-400 million.
- Bearish (20% probability): Prolonged external shocks and tighter financial conditions drive the surplus below €200 million, risking a deficit.
Monetary policy will remain a key determinant. Further ECB rate hikes could dampen trade finance and investment inflows. Conversely, fiscal stimulus or easing geopolitical tensions could support external balances. Latvia’s export diversification and energy transition efforts will also influence resilience.
Structural & Long-Run Trends
Over the past five years, Latvia’s current account has trended positively, supported by EU integration, improved competitiveness, and growing services exports. However, reliance on energy imports and exposure to regional risks remain structural vulnerabilities. Continued investment in green energy and digital sectors is critical for sustainable external stability.
Latvia’s November 2025 current account reading signals a pause in the recovery of external balances. While the surplus remains healthy, the sharp decline from October highlights emerging risks from monetary tightening and geopolitical uncertainty. Policymakers should balance inflation control with support for trade and investment to sustain external resilience.
Investors and analysts should watch upcoming trade data, ECB policy signals, and geopolitical developments closely. The interplay of these factors will shape Latvia’s external position and broader macroeconomic outlook in 2026.
Key Markets Likely to React to Current Account
The current account balance is a critical gauge of Latvia’s external health and influences currency, bond, and equity markets. Key tradable symbols historically sensitive to these dynamics include:
- EURUSD – Euro-dollar exchange rates respond to shifts in Eurozone external balances and monetary policy.
- OMXH25 – Nordic-Baltic equity index reflecting regional economic sentiment and capital flows.
- USDLTL – Dollar to litas exchange rate, directly impacted by Latvia’s external accounts.
- BTCUSD – Bitcoin’s role as a risk asset can reflect broader market sentiment amid geopolitical risks.
- EURONEXT – Pan-European stock exchange sensitive to Eurozone trade and policy shifts.
FAQ
- What is the significance of Latvia’s current account data?
- The current account reflects Latvia’s trade and income flows with the rest of the world, indicating external economic health and currency stability.
- How does monetary policy affect the current account?
- Tighter monetary policy raises borrowing costs, potentially reducing exports and investment inflows, which can narrow the current account surplus.
- What are the risks to Latvia’s current account outlook?
- Risks include geopolitical tensions, energy price volatility, and prolonged global financial tightening that could reduce trade competitiveness.
Takeaway: Latvia’s November current account contraction signals caution amid tightening financial conditions and geopolitical risks, but structural strengths offer resilience.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
Latvia’s current account surplus of €352.30 million in November 2025 contrasts with the €522.20 million recorded in October and the 12-month average of approximately €180 million. The sharp decline from October’s peak reflects a reversal of the positive momentum seen in August and September, when the surplus fluctuated between €475.90 million and a brief deficit.
Monthly data from the Sigmanomics database highlight a volatile trajectory over the past seven months, with the current account swinging from a deficit of €120.90 million in September to a surplus rebound in October, before the recent contraction. This volatility underscores the sensitivity of Latvia’s external balance to both cyclical trade shifts and external shocks.