Latvia

Capital: Riga

Local time:
It is %T:%M %A in Riga

GDP growth rate: 4.0% in 2013

FDI stock: 10 838 million USD in 2010

Economic trends

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 1^st, 2004, and now benefits from European subsidies: an amount of EUR 1.8 billion was granted between 2004 and 2008. Latvia benefits also of a well-trained and inexpensive workforce.

However, the country was strongly affected by the financial crisis in 2008-2009, its GDP had a drop of 17% with an unemployment rate that reached 17% in 2010, which placed the economy and the country's social fabric in jeopardy.  The share of the underground economy officially reached 40%.  In January 2009, riots broke out in the country. Given the size of the crisis, the country had to ask the International Monetary Fund and the European Union for assistance. An emergency loan of EUR 7 billion was granted at a price of a very unpopular austerity policy.  The government has established a policy of re-nationalization of certain banks. 

In 2010 the GDP had a reduction of 6% during the first quarter. Only the transport and communications sectors and the transforming industries had a slight growth.  The foreign debt of Latvia reached USD 9.6 billion. Latvia's gross foreign debt, which has been sharply increasing during the last few years, represents more than 100% of the GDP. The rate of inflation has also increased in the last few years reaching 17.5%.

Main branches of industry

The agricultural sector contributes about 4% to the GDP and employs 7.7% 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.

The industrial sector contributes about 24% to the GDP and employs about 28.6% of the workforce. The construction, metallurgy, industrial food-processing, and mechanical engineering sectors are booming.

The Latvian economy is driven by the services sector which contributes 72.4% to the GDP and employs 63.5% of the Latvian active population.

International trade

The Latvian market is open and competitive. The EU is its largest trade partner followed by Russia.

The foreign trade share in the country’s GDP is around 80%. The three main export partners of Latvia are Lithuania, Estonia, and Germany. These countries are reinforcing their positions in the Latvian market. The country's main exports are:  wood, coal, mineral fuels, oil, iron, steel, machinery, electrical and electronic equipment.

The share of imports dropped 50% since the crisis in 2008.  The main import partners are Lithuania, Germany, Russia, Poland, Estonia, Sweden and Finland.  Latvia imports mainly machinery, chemical products, fossil fuel, electricity and vehicles.