Since its independence from the former Soviet Union, Latvia has implemented market-oriented reforms. The country's economy has since then experienced a very good performance due to a constant growth in domestic consumption and the contribution of foreign investment. In addition, Latvia became a member of the EU on May 1st, 2004, and has benefited from large European subsidies. The country has officialized its membership of the Euro zone on the 1st of January 2014.
However, the country's economy showed signs of overheating between 2005-2007 and subsequently was strongly affected by the financial crisis of late 2008, its GDP had dropped of 17% and the unemployment rate reached 17% in 2010. After three years of recession, which placed the economy and the country's social fabric in jeopardy, the Latvian economy returned to strong growth in 2011 (+5.5%). Latvia was the fastest growing EU economy in 2012 with a growth of 5.1% of its economy. This trend was confirmed in 2013 with again the highest growth in the EU at 4%. The deep structural reforms undertaken as part of the assistance program provided jointly by the IMF and EU in 2008-2009 enabled Latvia to boost its exports, partly because of improved competitiveness. Latvia has a well trained and inexpensive workforce .
In the currently unfavourable European context, the country needs to continue working towards the consolidation of public finances and a return to price stability. Unemployment remained high (but decreased) in 2013 with 11.4% (against 15,2% in 2012) and the informal economy still represents nearly 30% of GDP in 2014. The government's target of a growth rate of 4% in 2013 was reached despite the deteriorating external environment of Latvia and the current rate of price increase. Only the weakness in investment (-7.7% in 2013) remain a handicap.
Latvia's goal is now to continue its economic recovery at a fast pace, using its participation to the Euro zone as well as the prospect of its entry in the OECD.
|Main Indicators||2011||2012||2013||2014||2015 (e)|
|GDP (billions USD)||28.51||28.39||30.96||32.82||34.12|
|GDP (Constant Prices, Annual % Change)||5.3||5.2||4.1||2.7||3.2|
|GDP per Capita (USD)||13,742||13,886||15e||16,145||16,836|
|General Government Balance (in % of GDP)||-1.5||0.8||-0.9||-0.7||-0.7|
|General Government Gross Debt (in % of GDP)||37.5||36.4||35.0e||36.0e||35.3|
|Inflation Rate (%)||4.2||2.3||0.0||0.7||1.6|
|Unemployment Rate (% of the Labor Force)||16.2||15.0||11.9||10.3||9.7|
|Current Account (billions USD)||-0.61||-0.71||-0.25||-0.03||-0.50|
|Current Account (in % of GDP)||-2.1||-2.5||-0.8||-0.1||-1.5|
Source: IMF - World Economic Outlook Database , Last Available Data
Note: (e) Estimated Data
The agricultural sector contributes about 4.9% to the GDP and employs over 11% of the population. It is dominated by cattle breeding, in addition to the production of grain, sugar beets, potatoes and vegetables. Apart from timber, which is largely exported, Latvia has almost no natural resources. The country has to import all its energy products, mainly from Russia. Fishing and forestry are also important parts of its primary sector.
The industrial sector has contributed about 25.7% to the GDP and employed about 25% of the workforce in 2013. The construction, metallurgy, industrial food-processing, and mechanical engineering sectors are booming. Latvia is well known as an important producer of railway equipment, radios, refrigerators, medication, wood and steel products.
The Latvian economy is driven by the services sector which contributes more than 69.4% to the GDP and employs over 64% of the Latvian active population. Thanks to attractive fiscal regulation, Latvia has developed a large financial services sector. The country offers a corporation tax rate of 15%, one of the lowest within the European Union.
|Breakdown of Economic Activity By Sector||Agriculture||Industry||Services|
|Employment By Sector (in % of Total Employment)||8.4||23.5||68.1|
|Value Added (in % of GDP)||4.1||21.8||74.1|
|Value Added (Annual % Change)||3.2||2.2||-1.4|
Source: World Bank - Last Available Data.
|Euro (EUR) - Average Annual Exchange Rate For 1 USD||0.51||0.53||0.50||0.55||0.53|
Source: World Bank - Last Available Data.
The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
The Latvian market is open and competitive. The EU, of which Latvia has been a member since 2004, is its largest trade partner, followed by Russia.
With its 530 km-long Baltic coastline, Latvia is bordered by Belarus and Russia to the east, Estonia to the north and Lithuania to the south. Its position allows it to function as a bridge between the two major economic areas of the EU and the CIS. In terms of foreign trade, Latvia's main customers in 2013 have been Lithuania (over 15% of exports), Estonia, Russia and Germany.The country exports mainly wood and coal, mineral fuels & oils, iron and steel, machinery and electrical and electronic equipment.
Imports, which dropped by 50% since the 2008 crisis, resumed in 2011. Its main suppliers are Lithuania (16% of imports), Germany, Russia, Poland and Estonia. Latvia mainly imports machinery, chemicals, fossil fuel and electricity and vehicles.
|Foreign Trade Indicators||2009||2010||2011||2012||2013|
|Imports of Goods (million USD)||9,793||11,691||16,290||17,228||17,628|
|Exports of Goods (million USD)||7,699||9,533||13,131||14,094||14,511|
|Imports of Services (million USD)||2,240||2,183||2,616||2,595||2,687|
|Exports of Services (million USD)||3,782||3,644||4,443||4,495||4,828|
|Imports of Goods and Services (Annual % Change)||-33.5||8.6||-||-||-|
|Exports of Goods and Services (Annual % Change)||-14.1||10.3||-||-||-|
|Imports of Goods and Services (in % of GDP)||45.4||55.2||62.7||-||-|
|Exports of Goods and Services (in % of GDP)||43.9||53.8||58.8||-||-|
|Trade Balance (million USD)||-1,992||-1,847||-3,241||-3,076||-2,921|
|Trade Balance (Including Service) (million USD)||-255||-210||-1,231||-1,019||-573|
|Foreign Trade (in % of GDP)||89.3||109.0||121.5||-||-|
Source: WTO - World Trade Organization ; World Bank , Last Available Data
(% of Exports)
|See More Countries||44.3%|
(% of Imports)
|See More Countries||41.7%|
Source: Comtrade, Last Available Data
|- bn USD of products exported in 2013|
|Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals||5.3%|
|Wood sawn or chipped lengthwise, sliced or barked,...Wood sawn or chipped lengthwise, sliced or barked, whether or not planed, sanded or end-jointed, of a thickness of > 6 mm||4.8%|
|Undenatured ethyl alcohol of an alcoholic strength...Undenatured ethyl alcohol of an alcoholic strength by volume of < 80%; spirits, liqueurs and other spirituous beverages (excl. compound alcoholic preparations of a kind used for the manufacture of beverages)||3.9%|
|Transmission apparatus for radio-telephony,...Transmission apparatus for radio-telephony, radio-telegraphy, radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras and other video camera recorders; digital cameras||3.2%|
|Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006)||2.6%|
|See More Products||80.2%|
|- bn USD of products imported in 2013|
|Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals||10.2%|
|Petroleum gas and other gaseous hydrocarbonsPetroleum gas and other gaseous hydrocarbons||4.5%|
|Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006)||2.9%|
|Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702)||2.8%|
|Transmission apparatus for radio-telephony,...Transmission apparatus for radio-telephony, radio-telegraphy, radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras and other video camera recorders; digital cameras||2.6%|
|See More Products||77.0%|
Source: Comtrade, Last Available Data
|- bn USD of services exported in 2011|
|Road transportRoad transport||14.86%|
|Rail transportRail transport||13.43%|
|Sea transportSea transport||12.90%|
|Air transportAir transport||7.87%|
|Personal travelPersonal travel||12.06%|
|Education-related expenditureEducation-related expenditure||0.49%|
|Health-related expenditureHealth-related expenditure||0.22%|
|Business travelBusiness travel||5.20%|
|Expenditure by seasonal and...Expenditure by seasonal and border workers||0.40%|
|Miscellaneous business,...Miscellaneous business, professional, and technical services||12.86%|
|Advertising, market research,...Advertising, market research, and public opinion polling||4.40%|
|Other business servicesOther business services||3.65%|
|Legal, accounting, management...Legal, accounting, management consulting, and public relations||1.96%|
|Business and management...Business and management consulting and public relations services||1.33%|
|Accounting, auditing,...Accounting, auditing, bookkeeping, and tax consulting services||0.44%|
|Legal servicesLegal services||0.22%|
|Architectural, engineering,...Architectural, engineering, and other technical services||1.42%|
|Services between related...Services between related enterprises, n.i.e.||0.93%|
|Research and developmentResearch and development||0.36%|
|Agricultural, mining, and...Agricultural, mining, and on-site processing services||0.13%|
|Operational leasing servicesOperational leasing services||1.69%|
|Merchanting and other trade-related...Merchanting and other trade-related services||0.62%|
|Other trade-related servicesOther trade-related services||0.67%|
|Computer servicesComputer services||3.65%|
|Information servicesInformation services||0.31%|
|Other information provision...Other information provision services||0.31%|
|Telecommunications servicesTelecommunications services||1.87%|
|Postal and courier servicesPostal and courier services||0.36%|
|Construction abroadConstruction abroad||1.33%|
|Construction in the compiling...Construction in the compiling economy||0.62%|
|Other direct insuranceOther direct insurance||0.31%|
|Auxiliary servicesAuxiliary services||0.09%|
|Freight insuranceFreight insurance||0.04%|
|Life insurance and pension fundingLife insurance and pension funding||0.04%|
|Audiovisual and related servicesAudiovisual and related services||0.27%|
|Embassies and consulatesEmbassies and consulates||0.58%|
|Other personal, cultural, and...Other personal, cultural, and recreational services||0.22%|
|Health servicesHealth services||0.09%|
|- bn USD of services imported in 2011|
|Air transportAir transport||10.07%|
|Road transportRoad transport||8.02%|
|Sea transportSea transport||7.65%|
|Rail transportRail transport||5.07%|
|Personal travelPersonal travel||23.01%|
|Education-related expenditureEducation-related expenditure||1.44%|
|Health-related expenditureHealth-related expenditure||0.08%|
|Business travelBusiness travel||6.13%|
|Expenditure by seasonal and...Expenditure by seasonal and border workers||0.45%|
|Miscellaneous business,...Miscellaneous business, professional, and technical services||12.94%|
|Other business servicesOther business services||4.31%|
|Advertising, market research,...Advertising, market research, and public opinion polling||3.41%|
|Legal, accounting, management...Legal, accounting, management consulting, and public relations||2.88%|
|Business and management...Business and management consulting and public relations services||2.35%|
|Legal servicesLegal services||0.30%|
|Accounting, auditing,...Accounting, auditing, bookkeeping, and tax consulting services||0.30%|
|Architectural, engineering,...Architectural, engineering, and other technical services||1.89%|
|Services between related...Services between related enterprises, n.i.e.||0.30%|
|Research and developmentResearch and development||0.15%|
|Agricultural, mining, and...Agricultural, mining, and on-site processing services||0.08%|
|Operational leasing servicesOperational leasing services||3.78%|
|Merchanting and other trade-related...Merchanting and other trade-related services||2.50%|
|Other trade-related servicesOther trade-related services||2.50%|
|Telecommunications servicesTelecommunications services||4.54%|
|Postal and courier servicesPostal and courier services||0.30%|
|Computer servicesComputer services||2.95%|
|Information servicesInformation services||1.59%|
|Other information provision...Other information provision services||1.59%|
|Construction in the compiling...Construction in the compiling economy||1.74%|
|Construction abroadConstruction abroad||0.91%|
|Franchises and similar rightsFranchises and similar rights||0.91%|
|Auxiliary servicesAuxiliary services||0.23%|
|Other direct insuranceOther direct insurance||0.15%|
|Other personal, cultural, and...Other personal, cultural, and recreational services||0.38%|
|Education servicesEducation services||0.15%|
|Audiovisual and related servicesAudiovisual and related services||0.23%|
|Embassies and consulatesEmbassies and consulates||0.61%|
Source: Comtrade, Last Available Data
The executive branch of government is directly or indirectly dependent on the support of the parliament, often expressed through a vote of confidence. Legislative power is vested in both the government and the parliament. The government does not have the power to dissolve the parliament. The people of Latvia enjoy considerable political rights.
The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Any Comments About This Content? Report It to Us.
© Export Entreprises SA, All Rights Reserved.
Last Updates: October 2014