Latvia flag Latvia: Economic outline

Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Since its independence, Latvia has implemented market-oriented reforms. The country's economy has performed well due to steady growth in domestic consumption and the contribution of foreign investment. As a member of the EU since 2004 (and of the Eurozone since 2014), it has benefited from substantial European funding. The growth rate has been positive since 2011 and was among the highest in the EU countries. Following the economic downturn caused by the outbreak of the COVID-19 pandemic, the country’s GDP rebounded strongly in 2021 (+4.5%) thanks to sizeable government support measures and solid export performance coupled with higher levels of private consumption. The latter should be the main growth driver over the forecast horizon, supported by strong wage growth and extra savings accumulated in recent years. Overall, real GDP growth this year is forecast at 5.2%, whereas it should marginally slow to 4% in 2023 (IMF).

Latvia's macroeconomic indicators are generally positive, as the country pursued tax and labour reforms in accordance with its stability programme for the period 2018-21. Temporary stimulus measures taken to offset the effects of the COVID-19 crisis (estimated at around 5% of GDP) caused an increase in the budget deficit, which stood at 7.8% in 2021 (from a level of 1.8% before the pandemic). In 2022, the deficit is projected to decrease to 2% of GDP as per the IMF forecast (4.2% according to the EU Commission), with a further reduction in 2023 (1%). The government debt-to-GDP ratio increased from a pre-pandemic level of 37% to 47.6% in 2021 (IMF estimates) and is expected to follow a downward trend in the short term (47.1% and 44.9% in 2022 and 2023, respectively. The EU RRF grants are set to gradually increase from 0.1% of GDP in 2021 to 0.8% of GDP in 2023 (when the total EU fund inflows are expected to peak at 3.3% of GDP). Driven by rapid energy price increases, inflation reached 2.6% last year. The spike in energy prices in the second half of 2021 is set to carry over to 2022, translating into a 3.6% growth in inflation.

Supported by short-time work schemes and wage subsidies, unemployment stood at 7.7% in 2021. The pick-up in investment activity in the second half of the year should bring down unemployment to a level of around 7% over the forecast horizon. the Latvian economy is negatively impacted by a demographic challenge: The country has one of the lowest population growth rates in the EU (-0.6% in 2020 - World Bank, latest data available), with birth numbers declining continuously. Moreover, Latvia has to face a strong emigration of skilled youth. The latest data published by the Central Statistical Bureau (CSB) show that 23.4 % of the country’s population were at risk of poverty in 2020, 1.8 percentage points more than one year earlier.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 34.0633.48e37.2040.8343.87
GDP (Constant Prices, Annual % Change) 2.0-3.6e4.55.24.0
GDP per Capita (USD) 17,739e17,549e19,53921,48923,135
General Government Balance (in % of GDP) -1.8-3.2e-7.8-2.0-1.0
General Government Gross Debt (in % of GDP) 37.043.5e47.647.144.9
Inflation Rate (%) 2.70.1e2.63.02.2
Unemployment Rate (% of the Labour Force) 6.38.1e7.77.27.1
Current Account (billions USD) -0.220.99-0.38-0.47-0.69
Current Account (in % of GDP) -0.63.0-1.0-1.1-1.6

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 GHS 0.240.200.180.170.16

Source: World Bank, 2015

 

Return to top

Any Comment About This Content? Report It to Us.

 

© Export Entreprises SA, All Rights Reserved.
Latest Update: April 2022