Economical overview
It took until 2011 before Latvia's economy
began to grow again after the dramatic decline in the
late 00s. After a couple of relatively good years,
growth slowed down in the mid-2010s, which was partly
due to reduced trade with Russia in the wake of the
Ukraine crisis. Exports are an important engine for the
country's economy.
The service sector's share of the economy has
increased significantly since the beginning of the
1990s, and today it accounts for three-quarters of GDP.
Agriculture has decreased in importance, but forestry is
growing. Forest and timber products are important export
products for Latvia's trade-oriented economy as well as
food, medicines and pharmacy products, chemical
products, electronics and metal products.
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Countryaah.com:
Major imports by Latvia, covering a full list of top products imported by the country and trade value for each product category.
The high budget deficit has been pushed down with the
help of austerity and loans, and since the beginning of
the 2010 has been around just over 1 percent of GDP,
while the central government debt has also been kept in
check. The increasingly stable economic situation
enabled Latvia to apply for accession to the euro zone
in early 2013. At the New Year 2014, the change from the
Latvian currency was lats to euros.
Latvia has undergone major economic changes. Prior to
World War II, Latvia had a vibrant market economy with
agricultural exports, but the country was industrialized
in the Soviet planning economy in the 1940s. Industry
and agriculture became dependent on Soviet commodities
and markets, and unprofitable production was started
with government subsidies. In connection with the
transition to market economy after independence in 1991,
an economic crisis arose: industrial production was
knocked out and unemployment rose, as did inflation. The
government succeeded in taking tough measures to reverse
the economic situation that brightened in 1994. But the
social divisions had increased sharply - corruption and
oligarchy had created a rich upper class, while many
Latvian people went unemployed. The situation was in the
early 00s when Latvia had the highest growth in the EU.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including LVA which represents the country of Latvia.
Although Latvia's growth again reached the EU's
highest levels at the beginning of the 2010, GDP was
lower than before the crisis and income inequality and
unemployment were still among the highest in the EU (see
Labor market).
By the middle of the decade, growth slowed down. This
was mainly due to the fact that EU sanctions against
Russia following its annexation of Crimea, and the
import restrictions with which Moscow responded, hit
hard on Latvia's dairy and fisheries exports. Exports to
neighboring countries decreased by a quarter in 2014
compared to the previous year. However, foreign trade
has subsequently picked up as Latvian companies
succeeded in finding new markets, including in the
Middle East and North Africa. The economy has also
received some traction from private consumption. But the
continued relocation is seen by analysts as a threat to
long-term growth. The working part of the population is
predicted to continue to shrink while the country is
losing highly educated labor.
A large part of the economy has remained black, or
gray, which is also an obstacle to economic growth that
benefits everyone in the population. The shadow economy
grew during the crisis years, but has declined and was
estimated at 21 percent of GDP in 2016. The tax fraud is
extensive.
Small and medium-sized companies are privatized,
while the energy and telecom sectors are still partly
state-owned following prolonged political struggles. The
privatization of real estate has been difficult with
legal battles over ownership before the Soviet era.
Latvia has the largest banking sector of the Baltic
countries. Sweden is a leading investor.
About 70 percent of exports are to the rest of the EU.
In Soviet times, about 97 percent of Latvia's exports to
the rest of the Soviet Union went. In recent years,
however, trade with Russia has increased again, and
transit trade between Russia and the West is of great
economic importance to Latvia.
FACTS - FINANCE
GDP per person
US $ 18,089 (2018)
Total GDP
US $ 34,849 M (2018)
GDP growth
4.8 percent (2018)
Agriculture's share of GDP
3.3 percent (2018)
Manufacturing industry's share of GDP
10.5 percent (2018)
The service sector's share of GDP
63.5 percent (2018)
Inflation
3.0 percent (2019)
Government debt's share of GDP
35.9 percent (2018)
Currency
Euro
2017
June
Banks are fined for penalties
June 27
Latvian Finansinspektionen convicts three of the country's banks to fine a
total of SEK 6 million for violating EU and US sanctions on North Korea. They
are accused of losing money through the lack of control to the North Korean
programs to develop nuclear weapons and ballistic robots.
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