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2020/09/16 / Erste Group Research

Baltics Outlook | Baltics benefited from less strict measures

Baltics performed well in 2Q20, as contraction was milder than expected. With solid rebound in 3Q20, prospects for this year are more optimistic. Government schemes supported labor market, as unemployment did not increase sharply.

The economic contraction due to COVID-19 will likely be less severe compared to the one observed during the Global Financial Crisis, which resulted in negative double-digit GDP growth among the Baltic states. Ahead of the pandemic, the Baltics seemed to have been more balanced and to have had much better economic fundamentals compared to 2008, when they were running high current account deficits.

The Baltics performed well in 2Q20. Less strict containment measures and quicker opening of the economies were likely the main reason. In 2Q20, GDP growth contracted by -8.9% y/y in Latvia and by -6.9% y/y in Estonia, while Lithuania was a shining star among the Baltics and EU, as GDP fell ‘only’ by -4.2% y/y. All in all, the contraction in 2Q20 was milder than expected and the economies seem to be recovering fast. Therefore, this year’s GDP growth forecasts from the European Commission, which stand at -7.7% for Estonia, -7.0% for Latvia and -7.1% for Lithuania, seem overly pessimistic.

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focus-
Currency in focus-
Sector in focus-


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