Latvijas Banka Revises 2025 Economic Forecasts Upwards for GDP, Inflation

Latvijas Banka Updates Macroeconomic Outlook

Latvijas Banka, the central bank of Latvia, has published its latest macroeconomic forecasts, prepared in December 2025. The revised projections indicate an improved outlook for economic growth in 2025, alongside an upward adjustment to the inflation forecast for the same period. These updates reflect the central bank's current assessment of the economic landscape in Latvia.

Revised GDP Growth Projections

The central bank now anticipates Latvia's Gross Domestic Product (GDP) to grow by 1.7% in 2025. This marks an upward revision from its previous forecast of 1.2%, which was issued in June 2025. The expected economic recovery is projected to be driven by several key factors, including increased investment, strengthening private consumption, and robust exports. Looking further ahead, Latvijas Banka forecasts continued GDP growth of 2.8% in 2026, 2.9% in 2027, and 3.2% in 2028.

Inflation Forecast Sees Upward Adjustment

In its latest assessment, Latvijas Banka has revised the inflation forecast for 2025 upwards to 3.9%. This is an increase from the 3.4% projected in the June 2025 forecasts. The central bank attributes this upward revision to several domestic factors:

• Stronger wage increases than previously expected.
• The revision of administered tariffs.
• Certain government decisions, including those related to raising excise taxes.

For the subsequent years, inflation is projected to stand at 3.2% in 2026, 2.9% in 2027, and 3.6% in 2028, generally remaining within the 3-4% range over the next three years.

Economic Drivers and Outlook

The central bank's analysis suggests that public and private investments will continue to be a stable pillar of the economy, supported by growing lending. Improvements in both domestic and external demand are expected to strengthen the economic situation in the coming years. As consumer sentiment and financial well-being improve, private consumption is anticipated to become a more significant driver of growth.