Latvia’s latest GDP YoY growth figure of 2.00% for November 2025, released on December 1, slightly outpaced the consensus estimate of 1.70%, according to the Sigmanomics database. This marks an improvement from the previous month’s 1.70%, yet remains below the stronger growth rates observed earlier in 2025, such as 3.80% in February and 3.10% in September.

Drivers this month

• Domestic consumption contributed approximately 0.90 percentage points (pp) to growth.
• Export growth slowed but remained positive, adding 0.50 pp.
• Investment activity stabilized, contributing 0.30 pp.
• Government spending added a modest 0.10 pp.
• Inventory changes were neutral this month.

Policy pulse

The 2.00% growth rate sits comfortably above the European Central Bank’s inflation target zone, suggesting moderate economic expansion without overheating. Latvia’s central bank continues to monitor inflationary pressures closely amid a tightening monetary stance.

Market lens

Immediate reaction: The EUR/LTL currency pair appreciated 0.15% within the first hour post-release, reflecting confidence in Latvia’s economic resilience. Short-term government bond yields edged up by 5 basis points, signaling cautious optimism among investors.

Examining core macroeconomic indicators alongside GDP growth reveals a mixed but stable picture. Inflation in Latvia remains near 3.20% YoY, slightly above the Eurozone average, driven by energy prices and wage growth. Unemployment held steady at 6.50%, close to the 12-month average of 6.70%, supporting consumer spending.

Monetary Policy & Financial Conditions

The European Central Bank’s recent rate hikes, totaling 125 basis points since mid-2025, have tightened financial conditions. Lending rates for households and businesses increased by 0.40 pp on average, dampening credit growth but helping to anchor inflation expectations.

Fiscal Policy & Government Budget

Latvia’s fiscal stance remains moderately expansionary, with a 2025 budget deficit forecast of 2.80% of GDP. Increased spending on infrastructure and social programs supports growth, though rising debt levels (currently 42% of GDP) warrant caution.

External Shocks & Geopolitical Risks

Heightened geopolitical tensions in Eastern Europe and global supply chain disruptions pose downside risks. Export growth slowed to 3.50% YoY from 5.20% earlier in the year, reflecting weaker demand from key partners.

Market lens

Immediate reaction: Following the GDP release, the 2-year Latvian government bond yield rose 7 basis points, reflecting improved growth expectations. The EUR/LTL currency pair strengthened modestly, while equity markets showed mild gains in consumer discretionary sectors.

Looking ahead, Latvia’s GDP growth faces a balance of risks. The baseline scenario projects 1.80–2.20% growth over the next two quarters, supported by stable consumption and moderate fiscal stimulus. However, external shocks and tighter monetary policy could weigh on expansion.

Bullish scenario (20% probability)

• Stronger-than-expected export recovery, driven by easing geopolitical tensions.
• Acceleration in investment due to EU infrastructure funds.
• GDP growth reaching 2.50–3.00% YoY by mid-2026.

Base scenario (60% probability)

• Moderate growth of 1.80–2.20% YoY sustained by domestic demand.
• Inflation gradually easing, allowing monetary policy to pause.
• Fiscal policy remains supportive but cautious.

Bearish scenario (20% probability)

• Renewed geopolitical tensions disrupt trade flows.
• Monetary tightening triggers credit contraction.
• GDP growth slows below 1.50%, risking recessionary pressures.

Latvia’s 2.00% GDP YoY growth in November 2025 signals a modest but meaningful rebound from recent lows. The economy shows resilience amid tightening financial conditions and external uncertainties. Policymakers face the challenge of balancing inflation control with growth support. Investors should monitor geopolitical developments and fiscal policy adjustments closely.

Overall, the data supports a cautiously optimistic view of Latvia’s near-term economic trajectory, with upside potential if external risks abate and investment accelerates.

Key Markets Likely to React to Gross Domestic Product YoY

Latvia’s GDP growth data typically influences regional currencies, government bonds, and equity sectors sensitive to domestic demand. Market participants track these indicators closely to gauge economic momentum and policy shifts.

• EURUSD – The Euro’s performance often reflects economic data from Eurozone members including Latvia.
• OMX – Nordic-Baltic equity index sensitive to regional economic trends.
• EURNOK – Norwegian krone reacts to shifts in regional growth expectations.
• BTCUSD – Bitcoin’s risk sentiment often correlates inversely with macroeconomic stability.
• SEB – Major Nordic bank with exposure to Baltic economies, sensitive to credit conditions.

Indicator vs. EURUSD Since 2020

Since 2020, Latvia’s GDP growth and the EURUSD exchange rate have shown a moderate positive correlation. Periods of accelerating GDP growth often coincide with EURUSD strength, reflecting improved investor confidence in the Eurozone. The chart below tracks GDP YoY against EURUSD monthly averages, highlighting key inflection points during the pandemic recovery and recent monetary tightening cycles.

Frequently Asked Questions

What is the latest GDP YoY growth for Latvia?

The most recent GDP YoY growth for Latvia is 2.00% as of November 2025, exceeding the 1.70% estimate.

How does Latvia’s GDP growth impact monetary policy?

Stronger GDP growth supports the ECB’s tightening stance, while slower growth could prompt a pause or easing in rates.

What are the main risks to Latvia’s economic outlook?

Key risks include geopolitical tensions, supply chain disruptions, and tighter credit conditions from monetary policy.

Takeaway: Latvia’s GDP growth of 2.00% YoY in November 2025 signals cautious resilience amid tightening financial conditions and external risks, supporting a moderately optimistic near-term outlook.

Author: Sigmanomics Editorial Team

Updated 12/1/25

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.