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How has the economic outlook in Latvia changed from past to present? Which sectors started to be pioneers for investing? All are in our article.
In Latvia in the first 8 months of 2014, the budget deficit was €223.8 million, which evolved to 1% of GDP, while the current account deficit was €224 million. In May 2014, the reserve of the Central Bank of Latvia was € 2.7 billion. The main sectors that should attract the attention of foreign investors are transport, infrastructure, food, timber, mechanical engineering and pharmaceutical industry.
Economic Data in 2016
Labour / Sector
- >>> Service (8.7%)
- >>> Industry (8%)
- >>> Access (9.6%)
- >>> Construction (8.3%)
- >>> Education (9.6%)
- >>> Agriculture (7.5%)
- >>> Health (5.9%)
- >>> Public Administration and Defense (6.6%)
- >>> Lithuania (19.21%) | Trade Value($):2,229,951.97
- >>> Estonia (11.89%) | Trade Value($):1,379,899.39
- >>> Russia (7.57%) | Trade Value($):878,175.00
- >>> Germany (7.06%) | Trade Value($):818,922.18
- >>> Poland (4.80%) | Trade Value($):584,340.30
- >>> Sweden (5.93%) | Trade Value($):688,114.30 
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Growth rates fell lower than the rates of the last 2 years in the first quarter of the year due to the decreasing domestic demand. While the decrease in consumption and public expenditures limited the total consumption increase in the first quarter, the fixed investment increase decreased by half compared to the previous quarter. With the effect of the growth in solid matter exports, a slowdown was observed in the foreign sector.
The growth rate is stable in the second quarter. According to the data obtained, economic sentiment has weakened its confidence in all sectors except industry, and has declined to the lowest level in the last two years in May. Moreover, the increase in exports slowed down considerably in April and the decrease in demands was seen to have damaged the foreign sector.
Due to the decrease in demand from the trade partners of Latvia, the restriction of the European Union harmonization funds and the increase of geopolitical uncertainty, growth rates decreased, as investment activities decreased. Nevertheless, thanks to the partially sustainable salary increase, private consumption will remain stable and overall growth will be achieved. FocusEconomics panelists state that GDP increased by 3.4% in 2019 and decreased by 3.2% in 2020.
The main reason for this is that there has been a long pandemic period around the world. While many countries experienced a decline in double digits, with its strong economy Latvia has been one of the countries that survived this period with the least loss.
The most important sectors of the Latvian economy are agriculture, chemicals, logistics and timber. Other important sectors are textile, food processing, machinery manufacturing and green technologies.
Latvia has soils suitable for temperate climate and agriculture. Agriculture, which constitutes 3/1 of the sector, is the traditional trade of Latvians and is still valid. Products such as dairy products and honey are important products of export.
There are educated people working in the chemical industry. Pharmacy, recycling, environmentally friendly chemicals and biocosmetic products are produced in Latvia and exported abroad. University- trained experts studying at the Organic Synthesis Institute conduct innovative basic research and development. Medical discoveries are among the highlights of the Latvian chemical industry.
Thanks to the geographical location of Latvia, the logistics industry is very important and is still relevant today. Latvia’s ports, railways and roads have always linked Europe and the rest of the West to the East. 25 million customers can be served within 48 hours in the Baltic region next to Latvia. Riga Airport operates flights to 100 destinations to Europe and transcontinental countries.
Timber is an important sector of Latvia. Half of the country is covered with forests, some of which have been cut and exported. Raw timber and manufactured products are an important component of Latvian exports. Designated natural reserves, state-owned forests and long-term business strategies maintain the balance between business and nature.
Innovative sectors such as high-tech electronics, information technologies and design are also important sectors of the Latvian economy. The infrastructure used in logistics and communication makes business and trade easier and more competitive. Innovations in Latvia are followed with worldwide interest.
Green energy is a short way of saying energy production compatible with nature. Latvia is one of the leading countries for green energy production. The government has prepared excellent business environments to support investments in this area. Thanks to these steps, Latvia has become the main exporter in the field of green energy in the European Union. Latvia continues its activities in the field of renewable energy at full speed to increase its studies and potential.
Igors Krumins continues his activities as a commercial and international lawyer within the body of “Jurmala Invest”. He has more than 10 years of experience, especially in the investment sector, and has provided consultancy services to numerous companies with his legal expertise. He successfully completed his undergraduate studies at Baltic International Academy and graduate studies at Latvijas Universitate. Apart from his native Latvian language, he can also speak Russian and English fluently.