Latvia's GDP growth by percentage, 2004-2009. Source: Latvia's Central Statistical Bureau
RIGA — Latvia, statistically at least, reached a much anticipated milestone in the last three months of 2009: its beleaguered economy actually posted significant growth, albeit only a quarterly basis.
The nation’s statistics agency announced on Tuesday that, based on preliminary data, gross domestic product grew 2.4 percent in the fourth quarter compared with the previous three months. On an annual basis, however, the picture wasn’t quite so rosy: GDP fell a staggering 17.7 percent in the fourth quarter compared to the same period in 2008. This is the most dramatic drop in the European Union, and possibly in all of Europe.
Still, the slight jump in fourth quarter activity gives reason to believe that, as some analysts have been saying, that Latvia’s $26 billion economy has hit the bottom and is slowly making a rebound.
Granted, these are only statistics, and preliminary ones at that. The average Latvian has not felt any turnaround, and if anything, the situation has only deteriorated as unemployment continues to climb.
What’s more, gross domestic product is still expected to fall in 2010, with estimates ranging from 2 to 4 percent.
For these reasons, many economists, as well as a few politicians, have said that Latvia’s economy will actually hit the bottom in the spring or summer of this year.
“The nation’s statistics agency announced on Tuesday that, based on preliminary data, gross domestic product grew 2.4 percent in the fourth quarter compared with the previous three months.”
Er, not entirely. The data released yesterday was not seasonally adjusted. To claim that the economy left the recession, you have to compare seasonally adjusted figures which were released today.
Just one addendum, according to the office of statistics today, Latvia’s economy shrunk by 3.1 percent in fourth quarter, compared with the previous three months.
Dear Jim,
Thank you for reading Baltic Reports and for your interest in this article.
The information in this article is based primarily on the flash GDP estimate the Latvian Central Statistics Bureau released Tuesday.
The Latvian Central Statistics Bureau has not released any seasonally-adjusted GDP numbers, and neither did the Latvian Central Bank. While some economists have speculated in the Latvian press that the seasonally-adjusted amount may be lower, there’s no official numbers backing that up. The full report on the Latvian 4th quarter GDP won’t be released until March.
Regards,
Nathan Greenhalgh
Editor
Baltic Reports
Dear Nathan:
The Latvian Central Statistics Bureau for some odd reason releases seasonally-adjusted figures with much less fanfare on the day after it releases the seasonally-unadjusted figures. They sent those figures to Eurostat, which is due to release the GDP flash estimates for the whole of the EU on Friday.
A phone call to the bureau would reveal that the seasonally-adjusted figures for the fourth quarter compared to the third quarter do not confirm Latvia turning any corner. The rate of recession has diminished, but Latvia is not out of the woods yet. The figure, if my memory serves, is -3.1 percent in the fourth quarter compared to the third one, which is more than -4 percent in the third quarter compared to the previous three months period.
In fact, the blue line on the graph you posted as an illustration, the one tracking the quarter to the previous three months shows how unreliable this measurement is. It moves up and down making it seem like a country had entered or left recession so frequently.
Besides, based on the data offered in the article, you cannot draw a conclusion with absolute certainty that Latvia has turned the corner as stated in the article.
Tomorrow, the Eurostat will release the flash estimates for the EU27. I believe the figure will be -3.1.
Regards,
Jim
Dear Jim,
Yes, you’re right about less fanfare :)
We contacted the Latvian Central Statistics Bureau about that. They said the seasonally-adjusted GDP shows -3.2 for the fourth quarter compared to the third quarter, and that this will be published Friday with Eurostat figures.
While we didn’t mention that in the article (perhaps we should’ve, and I’m sorry if you feel it left the article incomplete), we highlighted several other statistical factoids that support your conclusion, so I’m surprised you found our article overly optimistic about the state of the Latvian economy.
For example the last paragraph of the article reads:
“For these reasons, many economists, as well as a few politicians, have said that Latvia’s economy will actually hit the bottom in the spring or summer of this year.”
So, I don’t think it’s fair to say that we posited “with absolute certainty that Latvia has turned the corner as stated in the article” as you stated.
As for turning the corner as the headline states, there’s no denying that the unadjusted GDP figure shows an increase quarter-on-quarter for the first time since the crisis began. That’s all we were referring to with the headline. Whether that is significant or not, I’ll leave up to the reader to decide. We thought it was worth pointing out at least.
Anyway, I’m glad you’re reading our website and please feel free to comment on any article either by posting or emailing me.
Regards,
Nathan Greenhalgh
Editor
Baltic Reports
Dear Nathan:
Kudos for calling up the stat office. I was mistaken by 0.1.
There’s something in what you wrote earlier than struck me as incorrect:
“As for turning the corner as the headline states, there’s no denying that the unadjusted GDP figure shows an increase quarter-on-quarter for the first time since the crisis began.”
There’s denying :) Just look at the blue line graph. Generally, the first quarter compared to the fourth quarter shows a jolt ahead. It is a seasonally-unadjusted figure that sometimes shows a double-digit increase in GDP. Comparing the third quarter to the second quarter in 2009, the GDP shows an increase of 3.1 percent seasonally-unadjusted. Comparing the second quarter to the first quarter, it’s 9.2.
It seems the Baltic Reports has jumped the gun on this one. Latvia hasn’t turned the corner yet, no matter what information you use.
Here’s my source of information: http://www.csb.gov.lv/csp/content/?cat=2148
Dear Jim,
I was pointing out the fact that the Latvia GDP declined the least in the fourth quarter compared to the other quarters of 2009, using year-on-year indicators for each quarter. Looks like I muddled the explanation.
I notice the blue line and I’ll raise you the purple line on the graph. It’s inching up, after going down or flat for quite awhile, right?
Let me quote the press release verbatim: “Compared to the 3rd quarter of 2009, GDP growth comprises 2.4%. More precise and extended rate and value of GDP increase on the fourth quarter of 2009 will be published in the press release of March 11, 2010.”
Regards,
Nathan Greenhalgh
Editor
Baltic Reports
Dear Nathan:
“I was pointing out the fact that the Latvia GDP declined the least in the fourth quarter compared to the other quarters of 2009, using year-on-year indicators for each quarter.”
It isn’t true, either. It was -17.4 percent contraction in the second quarter of 2009, using year-on-year indicators (according to the Eurostat data), which is more than -17.7 that Latvia posted as a flash estimate this week for the fourth quarter.
The purple line compares one quarter to the corresponding period the previous year. The purple line has nothing to do with the passage you quoted from the press release.
It does not seem to be relevant to a definition of a country making its way out of recession, i.e. two consecutive quarters in positive based on the quarter by quarter basis. We haven’t even had one quarter where it would be so, based on the seasonally-adjusted figures.
I don’t deny that things could be looking up shortly for Latvia, but it seems that the Baltic Reports jumped the gun on Latvia turning corner based on the evidence it presented in the article. And as I said before, it doesn’t matter how you slice the figures.
Dear Jim,
Baltic Reports did not “jump the gun” on anything — we merely reported what the data shows. The purple line has indisputably turned a corner. The purple shows the GDP percentage “over the corresponding period of the previous year.”
Let’s look at how other media reported this:
Bloomberg:
“Latvian economic output fell a preliminary 17.7 percent in the fourth quarter, the smallest decline of the year,”
http://www.businessweek.com/news/2010-02-09/latvian-output-fell-17-7-last-quarter-smallest-drop-of-year.html
AP:
“Latvia’s battered economy, the worst-performing in the European Union, began its long-awaited recovery in the fourth quarter, when economic output ticked up 2.4 percent from the previous quarter, official data showed Tuesday.”
http://www.canadianbusiness.com/markets/market_news/article.jsp?content=D9DOL1H00
Please let me know if you have anymore concerns about our coverage by email at nathan@balticreports.com
Regards,
Nathan Greenhalgh
Editor
Baltic Reports
Dear Nathan:
I was aware how Bloomberg reported it. To err is human.
But I turned to Eurostat for information about the economic contraction based on a year-by-year basis. The PDF of the Eurostat press release is available here:
http://www.abh-ace.org/impor_en/info-center/trade-statistics/eurostat-newsreleases/2009/2009.12.03-n173-gdp_en.pdf
(Please, notice the figure for the second quarter year-on-year for Latvia. It will be a 17.4 percent decline).
PS Shouldn’t you double-check other media outlets as well? Or does one work under an assumption that journalists never, ever get anything wrong?
PPS Eurostat has just released new figures for the GDP. In case of Latvia, the smallest contraction was in the second quarter, not the fourth one, as you stated earlier. (http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-12022010-BP/EN/2-12022010-BP-EN.PDF)
Would you still say the Baltic Reports didn’t jump the gun?
Dear Jim,
Yes, I know what the seasonally-adjusted rate is, the stats bureau told me and the reporter.
But those statistics don’t negate the existence of other statistics, and even so the fourth quarter is still better than the previous quarter, which you could call a “change in direction,” “a turning of the corner,” a “rebound,” etc.
There is nothing inaccurate in this article.
Regards,
Nathan Greenhalgh
Editor
Baltic Reports
Dear Nathan:
In this case, I suppose Latvia is walking around the corner as the second quarter was better than the first, while the fourth quarter was better than the third. That’s, like, two corners in a row. Latvia turns corner in 2Q could have been as much of a headline back in the summer as this one is today. So many corners, so little time, I suppose.
Dear Jim,
Well, we’re not arguing with each other about facts it seems, just which stats are more important. Anyway, I do appreciate your concern on this, and we’ll try to incorporate more seasonally-adjusted numbers into future articles.
If you think Latvia’s economy hasn’t bottomed out yet, that’s fine. It certainly may turn the corner only to run into a wall. We mentioned that this could happen in the article before you ever started commenting on it. The tone and content of our article is much less optimistic than Bloomberg’s or the AP’s take on things. Although, I should point out that there are economists out there supporting a more optimistic point of view. So we tried to have some balance in the article.
Regards,
Nathan Greenhalgh
Editor
Baltic Reports