Latvia’s Current Account Narrows in January: Deficit at -3.0%
Latvia’s current account deficit improved in January 2026, registering -3.0% of GDP compared to -3.1% in December 2025. The latest reading marks a modest shift toward balance, though the deficit remains wider than levels seen in late 2025. This article examines the drivers, historical context, and market implications of the latest data release.
Table of Contents
Big-Picture Snapshot
Drivers This Month
- Goods trade deficit: -62 million EUR
- Services surplus: +86 million EUR
- Primary income: -23 million EUR
- Secondary income: -178 million EUR
Policy Pulse
Latvia’s current account deficit at -3.0% of GDP remains below the European Central Bank’s regional stability benchmarks. The reading signals a gradual improvement but still reflects external imbalances.
Market Lens
Market response was muted following the release. Investors viewed the narrowing deficit as a sign of stabilization, with no immediate impact on Latvian sovereign spreads or the EUR exchange rate.Foundational Indicators
Historical Context
- January 2026: -3.0% of GDP
- December 2025: -3.1% of GDP
- November 2025: -178 million EUR
- October 2025: +96 million EUR (surplus)
- September 2025: -4.5% of GDP
- August 2025: -296 million EUR
Trend Analysis
The current account deficit has narrowed by 0.1 percentage points month-over-month. Compared to September’s -4.5%, the improvement is more pronounced. The 12-month average remains wider, reflecting persistent external pressures through 2025.
Scenario Matrix
- Bullish: Deficit narrows to -2.5% (20% probability)
- Base: Deficit holds near -3.0% (65% probability)
- Bearish: Deficit widens to -4.0% (15% probability)
Chart Dynamics
Forward Outlook
Drivers to Watch
- Export growth in services
- Import demand for capital goods
- Remittance and secondary income flows
Risk Balance
Upside risks include stronger services exports and resilient remittance inflows. Downside risks stem from higher import costs and weaker eurozone demand. The base case sees the deficit stabilizing near current levels, with external shocks as the main swing factor.
Methodology and Sources
Figures are sourced from the Sigmanomics database and cross-verified with official releases from Latvijas Banka. Data reflect seasonally adjusted monthly balances, reported as a share of GDP and in euro terms.
Closing Thoughts
Market Lens
Latvia’s narrowing current account deficit has not triggered significant market moves. The euro and Latvian government bonds traded in tight ranges after the release, as investors weighed the gradual improvement against lingering external risks.Policy Pulse
While the deficit remains above the euro area median, the trend toward stabilization supports the case for steady monetary policy. Policymakers continue to monitor trade and income flows for signs of renewed pressure.
Key Markets Reacting to Current Account
Latvia’s current account data can influence regional equities, the euro, and select cryptocurrencies. The following symbols have shown sensitivity to shifts in Latvia’s external balances, reflecting broader risk sentiment and capital flows.
- AAPL — Global tech stocks often respond to European macro data, with risk-on sentiment linked to narrowing deficits.
- EURUSD — The euro’s value can shift on current account trends, especially when regional imbalances narrow or widen sharply.
- BTCUSD — Bitcoin’s price sometimes correlates with European capital flows, particularly during periods of external adjustment.
| Year | LV Current Account (% GDP) | EURUSD Trend |
|---|---|---|
| 2020 | -1.2 | Appreciating |
| 2022 | -2.8 | Stable |
| 2024 | -3.5 | Depreciating |
| 2026 (Jan) | -3.0 | Stable |
EURUSD’s trend has loosely tracked Latvia’s current account direction, with periods of deficit widening coinciding with euro weakness.
FAQ
- What does Latvia’s January current account figure mean?
- Latvia’s current account deficit narrowed to -3.0% of GDP in January, signaling a modest improvement from December’s -3.1% and reflecting stabilization in external balances.
- How does the current account impact Latvia’s economy?
- The current account measures the country’s trade and income flows. A narrowing deficit reduces reliance on external financing and can support currency stability.
- What are the main drivers of Latvia’s current account this month?
- Key contributors include a smaller goods trade deficit, a stable services surplus, and moderate outflows in primary and secondary income.
Latvia’s current account deficit is narrowing, but external risks remain in focus for policymakers and investors.
Updated 3/6/26
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
- Sigmanomics Economic Database, Latvia Current Account, accessed March 6, 2026.
- Latvijas Banka, Balance of Payments Statistics, January 2026 release.
January’s current account deficit of -3.0% of GDP improved from December’s -3.1%, and stands below the 12-month average of -3.6%. The deficit has narrowed by 1.5 percentage points since September 2025, when it reached -4.5%.
Monthly figures in euro terms show a swing from a -296 million EUR deficit in August to a +96 million EUR surplus in October, before returning to deficit territory. The recent trend reflects stabilization after a volatile second half of 2025.