The Ministry of Finance has maintained the Latvian economic growth forecast for this year at 1.4%, and the forecast for 2025 is 2.9%, the ministry told LETA. In turn, over the next three years, economic growth will slow down slightly and stabilize at level 2 .5%, the Ministry of Finance predicts. When starting to develop the state budget for 2025, the Ministry of Finance updated forecasts of macroeconomic indicators for 2024-2028. After a slight decline in 2023, mainly caused by the geopolitical situation and weak economic growth in external markets, Latvian GDP growth resumed at the beginning of this year. If in the first quarter this was due to strong growth in public consumption and the recovery of private consumption after a sharp rise in prices in previous years, then in the coming quarters the growth will be largely due to the restoration of external demand and faster disbursement of European Union (EU) funds, the Ministry of Finance noted . While the growth rate forecast for the eurozone and EU for this year is still at historically low levels, it is still double that of 2023, and there has also been a gradual improvement in business and consumer confidence in recent months. According to the Ministry of Finance, the recovery of the eurozone economy will also be facilitated by lower interest rates, since the European Central Bank already made its first decision to cut rates last week. Since inflation in the first months of this year decreased slightly faster than expected, the inflation forecast for 2024 was reduced to 1.2%, which is 0.4 percentage points less than the February forecast of the Ministry of Finance. In 2025, inflation will increase to 2.2% and stabilize at 2.5% in the medium term until 2028. Due to the economic downturn at the end of last year and in the first months of this year, the unemployment rate increased slightly, so the Ministry of Finance's forecast for unemployment has been revised upward – to 6.7% this year and to 6.3% next year. Despite this, the downward trend in the unemployment rate continues, which is due to both the decline in the working-age population and the resumption of economic growth. According to forecasts from the Ministry of Finance, by 2028 the unemployment rate may drop to 5%. The number of people employed in the national economy will remain at the level of 884 thousand people with a slight downward trend, and the average monthly increase in wages will remain high – 7.7% in 2024 and 6.3% in 2025. When developing forecasts for macroeconomic indicators, the Ministry of Finance proceeded from the fact that there would be no significant deterioration in the geopolitical situation and a sharp escalation of military actions, and also assessed the risks of the external and internal environment. Forecasts continue to be developed against a backdrop of high uncertainty, and the most significant downside risks to the economy remain in the geopolitical environment, where rising tensions could weaken investor and consumer confidence, lead to a new surge in energy prices and disrupt supply chains. The Ministry of Finance's forecasts for Latvian economic growth are close to the European Commission's forecasts published on May 15, but are more cautious. According to the European Commission's forecasts, Latvia's GDP growth will be 1.7% this year, and 2.6% in 2025. The European Commission also predicts higher inflation in Latvia this year – 1.6%, and in 2025 – 2%.
