Macroeconomic Review
October 2022

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The Covid-19 pandemic has significantly affected economic development on a global scale, including in Latvia. GDP in Latvia decreased by 2.2% in 2020. Thanks to the large-scale support measures of the government and European Union funds, as well as the improvement of the epidemiological situation, in 2021, Latvia's economy began to recover, and GDP increased by 4.1 percent.

When Russia invaded Ukraine on February 24, 2022, the geopolitical situation and economic development prospects worsened. Energy and food prices have risen significantly, adding to inflationary pressures at a time when the cost of living around the world was already rising rapidly in the recovery from the pandemic. War also affects the global economy by disrupting raw material supply chains.

The further development of the economy in the medium term depends on the situation in the external environment and the progress of reforms. The largest risk to Latvia's growth is related to the development of the global economy, especially stopping the expansion of the Covid-19 epidemic and the geopolitical situation. The future development of the EU's common economic space is also important. Latvia's economic advantages in the medium term will mainly be based on the achieved macroeconomic stability, as a result of which Latvia's credit ratings have improved, as well as on the efficiency of the planned EU support programs and improvements in the business environment.

Previous reviews and other publications on economic development can be found here ...