Latvian economy overview

Latvia’s economy has experienced one of the highest GDP growth rates in Europe. Latvia entered European Union in 2004, which led to rapid GDP growth. From 2005 to 2007, the average annual GDP growth rate exceeded 10%, when major inflows of foreign capital stimulated a significant increase in private consumption.

In 2008, the country entered a severe recession due to an unsustainable current account deficit, collapse of the real estate market, and large private debt exposure. During the crisis, GDP fell by a quarter, an external debt almost doubled, the number of employed persons decreased by 16%, while the real wages of those still employed fell by 12%. Latvia successfully emerged from the recession at the end of 2010, and growth has resumed, based mainly on the increasing role of exports.

In 2017, GDP grew by 3.8%, in 2018 – by 4.3%, while in 2019 – by 2.2%. The growth of the Latvian economy was considerably faster in 2017 and 2018 than in the previous years. It was fostered by the improvement in the external environment, private and public investments, and an increase in employment and wages. It must be noted that current export volumes exceed pre-crisis levels by more than twice.

Latvia has exceeded the forecasts when dealing with the covid-19 crisis, as we experienced a -3.5% drop in GDP comparing to the forecasted -7%. According to the European Commission, the forecast is that, in 2021, Latvia's GDP will grow by 3.5%, while in 2022 by 3.1%.


 

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