Latvia’s industrial sector demonstrated notable resilience in December 2025, with industrial production rising 1.40% month-over-month (MoM). This figure, sourced from the Sigmanomics database, outperformed market expectations of a -0.80% contraction and followed a robust 1.70% increase in November. The December print marks the second consecutive month of growth after a sharp 2.40% decline in October, reflecting a volatile but generally positive trajectory for Latvia’s manufacturing and production sectors.

Drivers this month

• Strong output in machinery and equipment manufacturing contributed approximately 0.60 percentage points (pp) to the MoM growth.
• Energy production rebounded, adding 0.40 pp after subdued performance in October.
• Food processing and chemical industries maintained steady growth, contributing 0.30 pp combined.
• Construction materials output remained flat, limiting upside potential.

Policy pulse

Latvia’s industrial growth remains above the European Central Bank’s inflation target zone, suggesting ongoing price pressures. The ECB’s recent rate hikes, aimed at curbing inflation, have yet to significantly dampen industrial momentum, but tighter financial conditions could weigh on future expansions.

Market lens

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

Industrial production is a core macroeconomic indicator that closely tracks economic health and manufacturing activity. Latvia’s 1.40% MoM increase in December contrasts with the 12-month average growth rate of 0.30%, underscoring a recent acceleration in industrial output. This growth aligns with a 3.20% year-over-year (YoY) increase, the strongest since mid-2024.

Monetary Policy & Financial Conditions

The ECB’s monetary tightening cycle, with a cumulative 125 basis points hike in 2025, has increased borrowing costs. Despite this, Latvia’s industrial sector has shown resilience, supported by moderate credit growth and stable lending conditions. However, rising interest rates could constrain capital investment in the medium term.

Fiscal Policy & Government Budget

Latvia’s government maintained a moderately expansionary fiscal stance in 2025, with a budget deficit of 2.80% of GDP, slightly above the EU average. Targeted subsidies for export-oriented industries and infrastructure investments have bolstered industrial capacity, cushioning the sector against external shocks.

External Shocks & Geopolitical Risks

Geopolitical tensions in Eastern Europe and supply chain disruptions have posed risks to Latvia’s industrial output. However, diversification of export markets and increased domestic sourcing have mitigated these impacts. Energy price volatility remains a key concern, given Latvia’s partial dependence on imported fuels.

Drivers this month

• Machinery & equipment manufacturing: 0.60 pp
• Energy production: 0.40 pp
• Food processing & chemicals: 0.30 pp combined
• Construction materials: 0.00 pp (neutral)

Policy pulse

Despite ECB tightening, industrial production growth remains robust, suggesting a lag in monetary policy effects. The sector’s momentum may slow if financial conditions tighten further.

Market lens

Immediate reaction: EUR/LVL appreciated 0.15%, while 2-year Latvian government bond yields rose 5 basis points, reflecting investor confidence in industrial resilience.

Looking ahead, Latvia’s industrial production faces a mixed outlook shaped by domestic policies, external risks, and global economic trends. We outline three scenarios based on current data and macroeconomic conditions:

Bullish scenario (30% probability)

• Continued fiscal support and export diversification drive sustained industrial growth of 1.00–1.50% MoM over the next quarter.
• Energy prices stabilize, reducing cost pressures.
• Monetary policy effects remain muted, allowing capital investment to continue.

Base scenario (50% probability)

• Industrial production grows moderately at 0.30–0.70% MoM, reflecting balanced risks.
• ECB tightening gradually slows credit availability.
• Geopolitical tensions cause intermittent supply chain disruptions.

Bearish scenario (20% probability)

• Further monetary tightening and rising energy costs trigger a contraction of 0.50–1.00% MoM.
• Export demand weakens amid global slowdown.
• Fiscal constraints limit government support.

Policy pulse

ECB’s next policy moves will be critical. A pause or easing could bolster industrial growth, while further hikes risk dampening momentum.

Market lens

Financial markets will closely watch Latvia’s industrial data for signs of economic resilience or vulnerability. Currency and bond market volatility may increase if downside risks materialize.

Latvia’s December industrial production print of 1.40% MoM signals a resilient manufacturing sector navigating complex macroeconomic headwinds. While monetary tightening and geopolitical risks pose challenges, fiscal support and export strength provide a solid foundation. The coming months will test the durability of this rebound amid evolving financial conditions and external shocks.

Investors and policymakers should monitor industrial output alongside credit conditions, energy prices, and geopolitical developments to gauge Latvia’s economic trajectory. The balance of risks suggests cautious optimism, with potential for upside if supportive policies persist and external pressures ease.

Key Markets Likely to React to Industrial Production MoM

Latvia’s industrial production data typically influences several key markets, reflecting its role as a barometer of economic health. The following tradable symbols have historically shown price movements correlated with Latvia’s industrial output, making them critical for traders and analysts monitoring regional economic trends.

• OMXH25 – Finland’s OMX Helsinki 25 index often moves in tandem with Baltic industrial trends due to regional economic integration.
• EURLVL – The EUR/LVL currency pair reacts swiftly to Latvian economic data, reflecting investor sentiment on the nation’s economic prospects.
• SEB – SEB bank’s stock price is sensitive to Baltic economic conditions, including industrial production fluctuations.
• BTCUSD – Bitcoin’s price occasionally reflects risk sentiment shifts triggered by macroeconomic data releases in emerging European markets.
• EURUSD – The EUR/USD pair often moves on broader Eurozone economic data, including Latvia’s industrial output as a component of regional growth.

Insight: Industrial Production vs. EUR/LVL Since 2020

Since 2020, Latvia’s industrial production MoM changes have shown a positive correlation with the EUR/LVL exchange rate. Periods of industrial expansion typically coincide with EUR/LVL appreciation, reflecting investor confidence in Latvia’s economic fundamentals. For example, the strong recovery in 2023 and 2025 saw EUR/LVL strengthen by approximately 3.50%, underscoring the currency’s sensitivity to industrial output trends.

Frequently Asked Questions

What does Latvia’s Industrial Production MoM indicate?

Latvia’s Industrial Production MoM measures monthly changes in manufacturing and production output, signaling economic health and industrial sector momentum.

How does the Industrial Production MoM affect Latvia’s economy?

It influences GDP growth, employment, and investor confidence, impacting monetary policy decisions and financial markets.

Why is the Industrial Production MoM important for investors?

It provides timely insights into economic trends, helping investors anticipate market moves and adjust portfolios accordingly.

Final Takeaway: Latvia’s 1.40% MoM industrial production growth in December highlights a resilient industrial sector poised to navigate tightening monetary policy and geopolitical risks, with cautious optimism prevailing for 2026.

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

Updated 12/4/25