Economic Development of Latvia
Experts of the Ministry of Economics have prepared a review on the Economic Development of Latvia. The review assesses the economic situation, as well as forecasts the prospects of economic development. It is planned that further on experts of the Ministry of Economics will prepare such a review once a year – in December. The present review, just like the previous ones, provides an assessment of the country’s economic situation and policy, as well as gives forecasts for development perspectives of the economy.
From 2005 to 2007, a huge inflow of foreign capital stimulated significant growth of private consumption and investment in Latvia. The average annual growth rate of GDP exceeded 10%. In 2008 and 2009, recession set in as the inflow of foreign capital stopped due to the global financial crisis. During the crisis, GDP fell by ¼, external debt almost doubled, the number of the employed decreased by 16%, while the real wages of the employed fell by 12 per cent.
As of the end of 2010, the recession has stopped in Latvia, and growth has resumed with its rates exceeding the average EU indicators. From 2011 to 2017, GDP grew by 3.5% per year on average. In 2017, GDP exceeded the pre-crisis level of 2007 by 0.7 per cent.
In 2017, the growth rate accelerated, GDP increased by 4.6%, which was its fastest growth in the last 6 years. Statistical data evidence that rapid growth continues in 2018 as well. GDP has grown by 4.7% in the 3 quarters 2018. The acceleration of growth in 2017-2018 was fostered by the improvement of the situation in the external environment, private and public investments, increase in employment and wages.
Further economic development depends on the situation in the external environment and progress in reforms. Further development of Latvia’s economy will be still closely linked to export possibilities. Therefore the highest risk to the growth of Latvia is linked to global economic development. Further development of the EU’s total economic space is particularly important. In the medium term, economic advantages of Latvia are mainly based on the achieved macroeconomic stability, as a result of which Latvia’s credit ratings have improved, as well as on the efficiency of planned support programmes of the EU structural funds and on the improvements in the business environment.
Previous reviews and other publications on economic development can be found here ...