Economic and Political Overview

flag Latvia Latvia: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response


Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Since its independence, Latvia has implemented market-oriented reforms. The country's economy has performed well due to steady growth in domestic consumption and the contribution of foreign investment. As a member of the EU since 2004 (and of the Eurozone since 2014), it has benefited from substantial European funding. The growth rate has been positive since 2011 and was among the highest in the EU countries before the outbreak of the COVID-19 pandemic. According to the IMF estimates, real GDP grew 2.5% in 2022 (1.8% as per the EU Commission) underpinned by strong growth in private consumption. Given the carry-over effect of the decline in activity in the second half of the year, growth is expected to remain lacklustre in 2023, with the EU Commission expecting a 0.1% growth rate over the year, followed by an uptick in 2024 (+2.7%).

Latvia's macroeconomic indicators are generally positive, as the country pursues tax and labour reforms in accordance with its stability programme. In 2022, the budget deficit was estimated at 6.1% of GDP by the IMF as the government energy support measures cost EUR 445 million. No funds have so far been allocated for the heating season 2023/2024, while the one-off investments linked to national security should amount to 0.8% of GDP: overall, the IMF expects the budget deficit to shrink to 2.2% of GDP this year and 1.5% in 2024, as the government plans to reduce the structural deficit to 0.5% of GDP by 2025. The government debt-to-GDP ratio increased marginally to 46% in 2022 but is expected to follow a downward trend over the forecast horizon, reaching 43.7% by 2024. The government's interest payments will increase to 2.2% of revenue in 2023-24, from 1.3% of revenue in 2021 (Fitch Ratings). Driven by rapid energy price increases, inflation reached the record level of 16.5% in 2022 and is forecast to remain in double digits through most of the first semester of 2023, before easing gradually to an annual average of 8% and returning closer to the ECB’s target the following year (2.9%).

The unemployment rate stood at 7.4% in 2022. In 2023, the effects of inflation will cause negative real wage growth, and low consumer sentiment will likely shrink household consumption. Overall, the IMF forecasts an unemployment rate of 7.2%. Latvia has to face a strong emigration of skilled youth and the country has one of the lowest population growth rates in the EU (-0.8% in 2021 - World Bank, latest data available), with birth numbers declining continuously. The latest data published by the Central Statistical Bureau (CSB) show that 22.5% of the country’s population are at risk of poverty. The GDP per capita (PPP) was estimated at USD 38,124 in 2022 by the IMF.

Main Indicators 202020212022 (E)2023 (E)2024 (E)
GDP (billions USD) 34.5739.7542.2347.4050.20
GDP (Constant Prices, Annual % Change) -
GDP per Capita (USD) 18,12420,99722,34825,13626,677
General Government Balance (in % of GDP) -3.5-6.5-4.1-3.3-1.9
General Government Gross Debt (in % of GDP) 42.144.741.642.041.0
Inflation Rate (%)
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) 0.90-1.67-2.66-1.48-1.08
Current Account (in % of GDP) 2.6-4.2-6.3-3.1-2.2

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

The agricultural sector contributes 4.1% of GDP and employs 7% of the active population (World Bank, latest data available). It is dominated by cattle breeding and dairy farming, in addition to the production of grain cereals (barley, wheat, rye and oats), sugar beets, potatoes and vegetables. Fishing and forestry are also important components of the primary sector. Apart from timber, which is largely exported, Latvia has almost no natural resources. Almost 30% of Latvia’s territory is destined for agricultural use. Since the early 90s, the structure of land management changed significantly, with the liquidation of collective farms in favour of household farms and – to a greater extent - of private farms, which currently dominate the country’s rural sector. At the end of 2021, there were 62.3 thousand agricultural holdings (-14.7% y-o-y), with an average size of 44.3 ha. In 2021, the harvested production of grain accounted for 3 million tonnes, which was 14.4% less than one year earlier (CBS - latest data available).

The industrial sector contributes 19.9% of the GDP and employs almost one-fourth of the active workforce (21%). The construction, metallurgy, industrial food-processing, and mechanical engineering sectors are booming. Latvia is well-known as an important producer of railway equipment, radios, refrigerators, medicines, timber and steel by-products. The manufacturing sector is estimated to account for 12% of the total GDP. Data published by the Central Statistical Bureau of Latvia (CSB) show that in 2022 industrial production output increased by 0.8% year-on-year. Output in manufacturing rose by 2.6 %, mining and quarrying dropped by 0.7 %, and electricity and gas supply fell by 11.5%. In fact, the country has to import all its energy products, mainly from Russia, and has been trying to diversify its sources following the Russian invasion of Ukraine and the resulting sanctions imposed by the EU.

The Latvian economy is driven by the services sector which contributes 63.7% of GDP and employs 69% of the active population. Thanks to its attractive fiscal regulation, Latvia has developed a large financial services sector. Transportation and ICT are also important activities for the country’s economy (with more than 6,900 companies operating in the latter sector and a 6% contribution to GDP). Transportation, in particular, contributes around 7.3% of GDP and employs more than 8% of the workforce (official governmental figures). The banking sector comprises 16 banks, including 12 credit institutions registered in Latvia, and four branches of European institutions (European Banking Federation). Finally, in 2022 the number of foreign and resident visitors in Latvia reached 2.2 million, which is 66.2% more than the previous year, but still 23.9% lower than before the pandemic.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 7.3 23.7 69.0
Value Added (in % of GDP) 4.1 19.9 63.7
Value Added (Annual % Change) -11.7 1.9 5.6

Source: World Bank - Latest available data.


Find more information about your business sector on our service Market Reports.

Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 MUR

Source: World Bank - Latest available data.


Find out all the exchange rates daily on our service Currency Converter.

Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

See the country risk analysis provided by Coface.


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Foreign Trade in Figures

The Latvian market is open and competitive, with foreign trade representing 130% of GDP (World Bank, latest data available). According to the Central Statistical Bureau of Latvia, in 2022 exports were comprised mostly of wood, wood products and charcoal; mineral fuels, mineral oils and products of their distillation; electrical machinery and equipment. Imports were led by mineral fuels, mineral oils and products of their distillation; electrical machinery and equipment; machinery and mechanical appliances.

With its 530 km-long Baltic coastlines on the west, Latvia is bordered by Belarus and Russia to the east, Estonia to the north and Lithuania to the south. This geographical position allows the country to function as a bridge between the two major economic areas of the EU and the CIS. At the same time, it also makes the country vulnerable to the external context, as shown during the Russia-Ukraine crisis and the following sanctions towards the Russian Federation. As a result, the volume of trade with Russia now accounts for less than 10% of the total while the EU has the lion's share with nearly 45.3% of total exports and an even larger share of imports. In the meantime, the country is also seeking new opportunities beyond Europe, with China and several countries in Central Asia. For 2022, the main partner countries were Sweden (EUR 956.5 million, 4.5%), Lithuania (EUR 933 million, 4.3%) and Germany (EUR 893.4 million, 4.2%); whereas imports came chiefly from Lithuania, Estonia, Germany, Poland, and the Russian Federation (their cumulated share comprised 60.3% of total imports).

The country has a structural trade deficit (notably due to its energy imports), which stood at 3.4% of GDP in 2021 (World Bank). In the same year, Latvia exported USD 20.8 billion worth of goods, importing USD 24.4 billion (+28.5% and +33.1% year-on-year, respectively). Trade in services recorded a surplus, with exports standing at USD 5.7 billion (+14.2% y-o-y) against USD 3.6 billion in imports (+23.2%). Preliminary figures from the National Statistical Office show that in 2022 Latvia exported EUR 21.27 billion worth of goods, importing EUR 26.5 billion (+29.3% and 35.8%). Both are the highest exports and imports value yet recorded, which can be explained by the rise in prices.

Foreign Trade Indicators 20172018201920202021
Imports of Goods (million USD) 17,03319,68118,95918,36324,447
Exports of Goods (million USD) 14,12616,16615,70516,20120,823
Imports of Services (million USD) 2,9593,5503,5272,9403,622
Exports of Services (million USD) 5,5576,2466,2114,9895,697
Imports of Goods and Services (Annual % Change)
Exports of Goods and Services (Annual % Change)
Imports of Goods and Services (in % of GDP)
Exports of Goods and Services (in % of GDP) 61.661.559.859.963.5
Trade Balance (million USD) -2,770-2,944-2,952-1,766-3,288
Trade Balance (Including Service) (million USD) -193-220-225341-1,376
Foreign Trade (in % of GDP) 123.8123.6120.3118.8130.4

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data


Main Partner Countries

Main Customers
(% of Exports)
Lithuania 17.8%
Estonia 10.6%
United Kingdom 7.7%
Germany 7.3%
Russia 7.3%
See More Countries 49.4%
Main Suppliers
(% of Imports)
Lithuania 17.2%
Germany 10.5%
Poland 9.6%
Russia 9.1%
Estonia 8.9%
See More Countries 44.7%

Source: Comtrade, Latest Available Data


Main Products

19.5 bn USD of products exported in 2021
Wood sawn or chipped lengthwise, sliced or peeled,...Wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or end-jointed, of a thickness of > 6 mm 7.5%
Telephone sets, incl. telephones for cellular...Telephone sets, incl. telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, incl. apparatus for communication in a wired or wireless network [such as a local or wide area network]; parts thereof (excl. than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528) 4.4%
Fuel wood, in logs, billets, twigs, faggots or...Fuel wood, in logs, billets, twigs, faggots or similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms 3.2%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.1%
Wheat and meslinWheat and meslin 3.1%
See More Products 78.6%
23.1 bn USD of products imported in 2021
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 4.1%
Telephone sets, incl. telephones for cellular...Telephone sets, incl. telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, incl. apparatus for communication in a wired or wireless network [such as a local or wide area network]; parts thereof (excl. than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528) 3.3%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 3.2%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.1%
Powered aircraft "e.g. helicopters and aeroplanes...Powered aircraft "e.g. helicopters and aeroplanes"; spacecraft, incl. satellites, and suborbital and spacecraft launch vehicles 3.1%
See More Products 83.4%

Source: Comtrade, Latest Available Data


To go further, check out our service Import Export Flows.


Main Services

4.9 bn USD of services exported in 2020
2.8 bn USD of services imported in 2020

Source: United Nations Statistics Division, Latest Available Data

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Political Outline

Current Political Leaders
President: Egils LEVITS (since 8 July 2019)
Prime Minister: Krisjanis KARINS (since 23 January 2019)
Next Election Dates
Presidential: 2023
Parliamentary: 2026
Main Political Parties
Latvia has a multi-party system, where no one party has a chance of gaining power alone, and parties must work with each other to form coalition governments. The major parties/alliances in the country are:

- New Unity (JV): centre-right political alliance formed by Unity, the Latgale Party and four other regional parties
- United List (AS):  centrist and regionalist alliance formed by the Latvian Green Party, the Latvian Association of Regions, and the Liepāja Party
- National Alliance (NA): national-conservative and right-wing populist political party
- Union of Greens and Farmers (ZZS): agrarian political alliance made up of the Latvian Farmers' Union, Latvian Social Democratic Workers' Party, and For Latvia and Ventspils
- "Harmony" (SDPS): centre-left, promotes closer ties with Russia
- The Progressives (P): social-democratic
- Latvia First (LPV): right-wing, populist
- For Stability (S!): centre, Eurosceptic
- Humane Latvia (PCL): centre to right-wing, populism
- New Conservative Party (JKP): conservatism
- Development/For! (AP!): centre, social liberalism
- Unity (V): centre-right, liberal conservatism, pro-Europe
- Union of Farmers and Greens (ZZS): centre
- Latvian Russian Union (LKS): left-wing, Russian minority politics.
Type of State
Democratic parliamentary republic.
Executive Power
The President is the head of state and is elected by the parliament in a separate election for a four-year term. The President is the commander-in-chief of the armed forces. He appoints the Prime Minister as head of the government who, in turn, has to receive a vote of confidence from the parliament and serves a four-year term. The Prime Minister enjoys executive powers which include implementation of the law in the country and running the day-to-day affairs. The Council of Ministers is nominated by the Prime Minister and appointed by the parliament.
Legislative Power
The legislature in Latvia is unicameral. The Parliament consists of 100 seats; its members are elected by direct popular vote to serve four-year terms. The parliament is called Saeima.

The executive branch of the government is directly or indirectly dependent on the support of the parliament, often expressed through a vote of confidence. Legislative power is vested in both the government and the parliament. The government does not have the power to dissolve the parliament. The people of Latvia enjoy considerable political rights.


Indicator of Freedom of the Press


The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:

Indicator of Political Freedom


The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Political Freedom:

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House


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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Latvia, please visit the official portal (in Latvian and Russian). Further information can be found on the website of the Ministry of Health (in Latvian).
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Latvia and the current sanitary measures in vigour, please consult the official portal (in Latvian and Russian), including the up-to-date information on the containment measures put in place. For public health recommendations, visit the website of the Centre for Disease Prevention and Control.
The government’s declaration of the state of emergency can be retrieved here.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

Following the measures taken by the European Commission, an export license is required to export personal protective equipment outside of the European Union. The export of medicines needed during the state of emergency is prohibited. For updates refer to the website of the Latvian Customs.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Latvia on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

To know about the economic measures taken by the Latvian government to address the impact of the COVID-19 pandemic on the national economy, please visit the website of the Ministry of Finance and the dedicated section on the official portal (in Latvian and Russian). Further information can be retrieved on the website of the Ministry of Welfare (in Latvian).
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the website
of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Latvian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Latvia in the
IMF’s Policy Tracker platform.

Support plan for businesses

For information on the local business support scheme and taxation measures established by the Latvian government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the dedicated section on the official portal (in Latvian and Russian). Further information on support measures for entrepreneurs can be accessed here.
For an overview of the tax relief measures to support businesses, consult the website of KPMG.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

The Latvian government allocated EUR 45 million to help farmers who lost part of their turnover due to weak demand from their export markets.
When employees are not working as a direct consequence of limitations imposed to tackle the spread of the virus, 75% of the employee’s average salary for the past six months can be paid by the government (capped at EUR 700/month), provided that the company's income in March or April 2020 decreased by at least 20% in comparison to the same month in 2019, and that the company’s exports amounted to at least 10% of total turnover in 2019 or to at least EUR 50,000.
The European Commission adopted a
Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.


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Latest Update: May 2023