In April-June, compared to Q2 2019, gross domestic product (GDP) decreased by 8.9% (according to seasonally and calendar non-adjusted data). In the first half of the year GDP reduced by 5.4%.
In Q2, GDP at constant prices was EUR 6.9 billion. As compared to the previous quarter, GDP fell by 6.5% (according to seasonally and calendar adjusted data).
In Q2, compared to Q2 2019, production growth in agricultural sector comprised 2.1% (growth of 4.9% in crop production, a drop of 3.7 % in livestock production), but in forestry and fishing volume reduction was observed.
In manufacturing volume decreased by 6.9% (reduction was observed in 16 out of 22 manufacturing sectors). In the largest manufacturing sectors decrease was observed: in timber production – of 1.7%, manufacturing of food products – 3.8%, manufacture of non-metallic mineral products – 6.5% and manufacture of fabricated metal products – 7.8%. Growth in manufacturing was observed in manufacture of computer, electronic and optical products – of 4.9%, manufacture of chemicals and chemical products – 18.6%.
Electricity, gas, steam and air conditioning supply rose by 2.7%. Production and distribution of electricity fell by 0.3%, but in steam and air conditioning supply increase of 24.2% was observed (due to longer heating season).
Reduction in construction production of 0.6% was affected both by COVID-19 pandemic and by the lack of voluminous construction objects. Out of construction enterprises surveyed in 5% of enterprises construction work was not carried out in Q2 and 6% of respondents indicated on reduction in construction demand due to the impact of COVID-19. Volume of building construction decreased by 5%, but of civil engineering – by 7.7% (of which, construction of roads and railways fell by 15.6% and civil engineering – by 46.6%; but increase of 27% was registered in construction of utility projects. But specialized construction activities were carried out 12.3% more, which was promoted by rise in demolition and site preparation (of 26.4%), electrical, plumbing and other construction installation activities (16.5%) and other specialized activities (27.7%). A drop of 8.2% was observed in building completion and finishing.
Retail trade reduced by 1.6%, of which retail sale of food products increased by 1%. Affected by significant price drop retail sale of automotive fuel rose by 1.8%, but retail sale of non-food products, except automotive fuel, fell by 5.1%. Wholesale, retail trade and repair of motor vehicles and motorcycles decreased significantly (of 29.2%), as due to uncertainty of customers regarding possible consequences left on economy by COVID-19, purchase of transport vehicles was postponed. In the uncertain economic situation entrepreneurs and private persons did not want to take up new financial obligations.
In wholesale trade drop comprised 11.7%. As compared to Q2 the previous year, increase was observed only in one sector – wholesale of information and communication equipment of 19.3%, which was affected by the need to adapt to requirements for remote work and studies during COVID-19 pandemic.
Restrictions imposed by governments of Latvia and other countries for limitation of COVID-19 pandemic significantly affected activity of transport and storage sectors – a drop of 26.6%, of which, a drop in volume of provision of services in storage and transport auxiliary services reached 21%, in passenger traffic – 69.3%, in postal and courier activities – 4.5% and in freight transport – 16.4%.
Restrictions imposed for reduction of COVID-19 pandemic fiercely affected services provided by accommodation and catering sectors – a fall of 63.4%, of which in accommodation – of 82.2%, in catering – of 55%.
Services of information and communication sectors reduced by 6.4%, of which of 9.7% in telecommunication services, of 6.1% – in information services and of 2.4% – in computer programming and consulting.
In financial and insurance sector decrease comprised 9.9%, which was promoted by drop in financial service activities and increase in insurance, reinsurance and pension funding sector, as well as in activities auxiliary to financial services and insurance activities. Fall in financial service activities was affected by drop in commission income by credit institutions (from services for card payments, from settlements and payments, from account fees and asset management) and formation of losses on transactions with financial instruments (in contrast to profit in the corresponding period of the previous year). Growth in insurance, reinsurance and pension funding sector was promoted by results of activity of private pension plans.
A decline of 3.3% in professional, scientific and technical activities sectors was affected by 2.9% less services provided in activities of head offices, management consultancy activities, architectural and engineering services, in technical testing and analysis – by 6.8%, volume of services provided by advertising and market research reduced by 16.9%. However, growth in legal and accounting activities of 7.1% had positive impact on the development of sector.
Administrative and support service activities reduced by 11.4%, which was affected by a significant drop of 73.3% in travel agency, tour operator reservation service and related activities, of 11.9% – in labor recruitment and provision of personnel sector, of 15.2% – in security and investigation activities and of 2.2% – in rental and leasing services sector.
One of services sectors hit the hardest by COVID-19 pandemic was arts, entertainment and recreation, where drop against the corresponding period of the previous year reached 46.3%.
The volume of taxes on products (value added tax, excise and customs taxes) decreased by 7.6%. A decrease was observed both in value added tax and excise duty revenues. Volume of taxes on products was affected by increase of rates on several positions of taxes.
As compared to GDP flash estimate, total value added of sectors did not change, but the latest information on taxes on products concerning the period affected the overall estimate positively and increased GDP by 0.9%.
In Q2, household expenses for final consumption, compared to the corresponding period of the previous year, reduced by 21.4%. Measures taken by the government to limit spread of COVID-19 virus significantly affected household expenditure in two out of traditionally largest expenditure groups: transport (pubic transport, purchase and exploitation of transport vehicles) and recreational and cultural events. Expenditure in these final consumption groups reduced by 26.5% and 74.5%, respectively. Affected by the pandemic, households also spent 63.2% less on accommodation and catering services. A drop of 1.6% was also observed in household expenses on dwelling, which was mainly determined by reduction in expenses for water supply, electricity, gas and other fuels.
Government final consumption expenditure grew by 1.7%.
Investment in gross fixed capital fell by 6.1%. Investment in dwellings and other buildings and structures reduced by 0.6%, which was affected by implementation of precautionary measures at construction sites, delay of raw materials, as well as lack of new voluminous objects. Investment in machinery and equipment (of which in transport vehicles) reduced by 12.6%, but investment in intellectual property products – fell by 9.2%.
Exports of goods and services decreased by 12.5%, of which exports of goods (75% of total exports) – by 4%, exports of services – by 31.2%, which was mainly determined by drop of exports of tourism services caused by COVID-19 pandemic.
Imports of goods and services decreased by 15.3%. Imports of goods, which comprised 86 % of total imports, dropped by 11.8%, but imports of services – by 32.5%. Decline in imports of services was mainly determined by drop in imports of transport and tourism services.
Compared to Q2, in Q2 2020 compensation of employees at current prices fell by 3.9%, of which total wages and salaries reduced by 3.7%, but employers’ social security contributions fell by 4.6%.
Total compensation of employees reduced in commercial services sectors – by 4.4%, but in services sectors in total – by 3.7%.
Gross operating surplus and mixed income decreased by 17%, whereas the balance of taxes on production and imports and subsidies went down by 11.8%. (BNN/Business World Magazine)
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