Macroeconomic Review
April 2023


After the recovery from the Covid-19 crisis, the economy started to grow again in 2021. The large-scale support measures of the government and EU funds, as well as the improvement of the epidemiological situation, contributed to the recovery of Latvia's economy, and GDP grew by 4.1% in 2021.

After Russia's invasion of Ukraine, economic growth in Latvia slowed down to 2% in 2022. The economic development in 2022 was significantly affected by supply chain disruptions caused by the war, the rise in inflation caused by energy and food prices, as well as the decrease in global demand. In the first half of 2022, the consequences of the war were not yet fully felt. The economy grew by 3.9%, compared to the first half of 2021.

The rise was influenced by the low base at the beginning of 2021 and the gradual lifting of Covid-19 restrictions. However, in the 2nd half of the year, annual growth decreased to 0.3%, as the balance of exports and imports worsened, and private consumption and investment growth rates decreased.

It is anticipated that geopolitical uncertainty and high prices will continue to affect economic development in 2023 as well. Most likely, very moderate economic growth rates will be observed in the first half of 2023. The Ministry of Economics forecasts that, in 2023, the GDP will remain close to the 2022 levels, if no significant changes in the existing geopolitical situation take place.

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 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 ...