Mārtiņš Āboliņš, Citadele Bank Economist
Global economy remains in a relatively moderate cyclical slowdown, but concerns about a recession in the US and Europe have not yet materialized, and short-term macroeconomic indicators are increasingly showing signs of stabilization.
The Baltic region continues to grow faster than the euro area as a whole, despite declining world trade and slowing global economy. In Lithuania and Estonia, GDP grew by 3.9-4.3% year-on-year in the first three quarters of 2019, while growth in Latvia declined to 2.5%.
The unfavourable global macroeconomic environment is currently most felt in manufacturing and exports of goods, but industrial growth in the Baltics in 2019 has been significantly faster than elsewhere in the euro area, indicating that the Baltic producers remain competitive. However, this resilience of the industry to the decline in external demand is unlikely to continue in 2020.
Domestic consumption remains one of the main drivers of economic growth in the Baltics. However, in the final months of the year, annual retail sales growth in euro terms has slowed slightly from 6-8% in the first half of 2019 to 4-5% in the last months of the year.