The Latvian economy contracted a seasonally and calendar-adjusted 1.5% y/y in the first quarter, a flash reading from the Central Statistical Bureau (CSB) showed on April 30.

The contraction is the direct effect of the lockdown measures imposed by the Latvian government – and those elsewhere in Europe, which had an effect on Latvia’s foreign trade dynamics – in March in order to tackle the coronavirus (COVID-19) pandemic. The flailing services sector drove the decline in the first quarter, the CSB said.

Unadjusted, GDP also contracted, albeit slightly less at -1.4% y/y, data also showed. The contraction in January-March follows an adjusted expansion of 1% y/y (1.1% y/y without adjustment) in the fourth quarter.

In quarterly terms, the economy shrank a seasonally and working-day adjusted 2.9% in October-December, compared to an expansion of 0.2% q/q in the fourth quarter.

“Latvian authorities have imposed coronavirus containment measures swiftly and decisively… Nonetheless, the economy in Q1 has suffered more than neighbouring Lithuania. In part, likely because it was experiencing problems even before the COVID-19 crisis,” Swedbank said in a comment.

“The bulk of COVID-19 impact is to come in Q2 with several indicators pointing to a sharp decline in activity. Manufacturing (already weak) and construction are to feel the virus impact with some delay,” Swedbank added.

Detailed data on GDP growth in the first quarter are due on May 29.