View source for Economy of Latvia

{{Short description|none}}
{{Use dmy dates|date=August 2022}}
{{Infobox economy
| country = Latvia
| image = File:Vistas desde la iglesia de San Pedro, Riga, Letonia, 2012-08-07, DD 09.JPG
| caption = [[Riga]] with its [[Riga Central Market|Central Market]] in the view
| image_size = 310px
| currency = [[Euro]] (EUR, €)
| fixed exchange = 
| year = Calendar year
| organs = [[EU]], [[OECD]] and [[World Trade Organization|WTO]]
| group = {{plainlist|
*[[Developed country|Developed/Advanced]]<ref>{{cite web |url=https://www.imf.org/external/pubs/ft/weo/2019/01/weodata/weoselco.aspx?g=110&sg=All+countries+%2f+Advanced+economies |title=World Economic Outlook Database, April 2019 |publisher=[[International Monetary Fund]] |website=IMF.org |access-date=29 September 2019}}</ref>
*[[World Bank high-income economy|High-income economy]]<ref>{{cite web |url=https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups |title=World Bank Country and Lending Groups |publisher=[[World Bank]] |website=datahelpdesk.worldbank.org |access-date=29 September 2019}}</ref>}}
| population = {{Decrease}} 1,853,400 (2024)<ref>{{cite web |title=Population on 1 December |url=https://data.stat.gov.lv/pxweb/en/OSP_PUB/START__POP__IR__IRS/IRS010m/table/tableViewLayout1/ |website=data.stat.gov.lv |access-date=2 February 2025}}</ref>
| gdp = {{plainlist|
*{{increase}} $45.52 billion (nominal, 2024)<ref name="IMFWEOLV">{{cite web |url=https://www.imf.org/en/Publications/WEO/weo-database/2024/October/weo-report?c=941,&s=NGDP,NGDPD,PPPGDP,NGDPPC,NGDPDPC,PPPPC,LUR,LP,&sy=2024&ey=2024&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1 |title=Economy of Latvia: October 2024|publisher=[[International Monetary Fund]]|website=imf.org |accessdate=2 February 2025}}</ref>
*{{increase}} $81.79 billion ([[Purchasing power parity|PPP]], 2024)<ref name="IMFWEOLV"/>}}
| gdp rank = {{plainlist|
*[[List of countries by GDP (nominal)|97th (nominal, 2024)]]
*[[List of countries by GDP (PPP)|106th (PPP, 2024)]]}}
| growth = {{plainlist|
* 2.0%&nbsp;(2022)<ref name="StatGovLV2022">{{cite web | url=https://stat.gov.lv/en/statistics-themes/economy/gross-domestic-product-quarterly-data/press-releases/22347-gross-domestic | title=GDP has risen by 2.0 % in 2022 and by 0.3 % in the 4th quarter|date=February 28, 2023 }}</ref>
* −0.3%&nbsp;(2023)<ref name="IMF_forecast2">{{cite web | url=https://stat.gov.lv/en/statistics-themes/economy/gross-domestic-product-quarterly-data/press-releases/12251-gross-domestic | title=Republic of Latvia: Staff Concluding Statement of the 2024 Article IV Mission|work=[[International Monetary Fund]]|date=July 9, 2024 }}</ref>
* −0.4%&nbsp;(2024)<ref name="StatGovLV2024">{{cite web | url=https://stat.gov.lv/en/statistics-themes/economy/gross-domestic-product-quarterly-data/press-releases/22347-gross-domestic | title=In 2024 drop of GDP comprised 0.4 % and in the 4th quarter – also 0.4 %|date=February 28, 2025 }}</ref>
* 2.4%&nbsp;{{abbr|(2025f)|2025 forecast}}<ref name="IMF_forecast2"/>
}}
| per capita = {{plainlist|
*{{increase}} $24,222 (nominal, 2024)<ref name="IMFWEOLV"/>
*{{increase}} $43,526 (PPP, 2024)<ref name="IMFWEOLV"/>}}
| per capita rank = {{plainlist|
*[[List of countries by GDP (nominal) per capita|47th (nominal, 2024)]]
*[[List of countries by GDP (PPP) per capita|47th (PPP, 2024)]]}}
| cpi = {{decrease}} 59 out of 100 points (2024)<ref name="ti_2024">{{cite web |url=https://www.transparency.org/en/cpi/2024 |date=11 February 2025 |title=Corruption Perceptions Index |website=[[Transparency International]] |access-date=11 February 2025 |archive-date=11 February 2025 |archive-url=https://web.archive.org/web/20250211084918/https://www.transparency.org/en/cpi/2024 |url-status=live }}</ref> ([[Corruption Perceptions Index#Ranking over Time|38th]])
| sectors = {{plainlist|
*[[Primary sector of the economy|agriculture]]: 3.9%
*[[Secondary sector of the economy|industry]]: 22.4%
*[[Tertiary sector of the economy|services]]: 73.7% 
*(2017 est.)<ref name="CIALV">{{cite web |url=https://www.cia.gov/the-world-factbook/countries/latvia/|title=CIA World Factbook |publisher=[[Central Intelligence Agency]] |website=CIA.gov |access-date=21 July 2024}}</ref>
}}
| components = 
| inflation = {{plainlist|
*9.0% (2023)<ref name="inflationLV">{{cite web | url=https://www.imf.org/en/Publications/WEO/weo-database/2024/October/weo-report?c=941,&s=PCPIPCH,&sy=2022&ey=2029&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1 | title=World Economic Outlook database: October 2024 |work=[[International Monetary Fund]]|date=10 February 2025 }}</ref>
*1.3% (2024)<ref name="inflationLV"/>
*2.2% {{abbr|(2025f)|2025 forecast}}<ref name="inflationLV"/>
}}
| poverty = {{plainlist|
*{{decreasePositive}} 24.3% at risk of poverty or social exclusion (AROPE, 2024)<ref>{{cite web |url=https://ec.europa.eu/eurostat/databrowser/view/tepsr_lm410/default/table?lang=en |title=People at risk of poverty or social exclusion by sex |publisher=[[Eurostat]] |website=ec.europa.eu |access-date=2 February 2025}}</ref>}}
| gini = {{increaseNegative}} 34.2 {{color|darkorange|medium}} (2024)<ref>{{cite web |url=https://ec.europa.eu/eurostat/databrowser/view/ilc_di12/default/table?lang=en |title=Gini coefficient of equivalised disposable income – EU-SILC survey |publisher=[[Eurostat]] |website=ec.europa.eu |access-date=8 July 2024}}</ref>
| hdi = {{plainlist|
*{{increase}} 0.889 {{color|darkgreen|very high}} (2023)<ref name="arghdi">{{Cite web |date=6 May 2025 |title=Human Development Report 2025 |url=https://hdr.undp.org/system/files/documents/global-report-document/hdr2025reporten.pdf|url-status=live |archive-url=https://web.archive.org/web/20250506051232/https://hdr.undp.org/system/files/documents/global-report-document/hdr2025reporten.pdf |archive-date=6 May 2025 |access-date=12 May 2025 |publisher=[[United Nations Development Programme]] |language=en}}</ref> ([[List of countries by Human Development Index|41st]])
*{{increase}} 0.812 {{color|darkgreen|very high}} ([[List of countries by inequality-adjusted HDI|IHDI (38th)]]) (2023)<ref name="arghdi"/>}}
| labor = {{plainlist|
*{{increase}} 977,523 (2023)<ref>{{cite web |url=https://data.worldbank.org/indicator/SL.TLF.TOTL.IN?locations=LV&most_recent_value_desc=true |title=Labor force, total – Latvia |publisher=[[World Bank]] |website=data.worldbank.org |access-date=21 July 2024}}</ref>
*{{increasePositive}} 77.5% employment rate (2023)<ref>{{cite web |url=https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Employment_-_annual_statistics |title=Employment rate by sex, age group 20-64 |publisher=[[Eurostat]] |website=ec.europa.eu/eurostat |access-date=20 July 2024}}</ref>}}
| occupations = {{plainlist|
*[[Primary sector of the economy|agriculture]]: 7.7%
*[[Secondary sector of the economy|industry]]: 24.1%
*[[Tertiary sector of the economy|services]]: 68.1% 
*(2016 est.)<ref name="CIALV"/>}}
| unemployment = {{plainlist|
*{{decreasePositive}} 6.8% (December 2024)<ref>{{cite web|title=Unemployment rate|url=https://stat.gov.lv/en/statistics-themes/labour-market/unemployment/press-releases/22392-unemployment-december-2024?themeCode=NBBA|website=Central Statistical Bureau of Latvia |access-date=2 February 2025}}</ref>
*{{increasePositive}} 13.0% youth unemployment (15 to 24 year-olds; November 2024)<ref>{{cite web|title=Youth unemployment rate|url=https://stat.gov.lv/en/statistics-themes/labour-market/unemployment/press-releases/20965-unemployment-3rd-quarter-2024?themeCode=NBBA|website=Central Statistical Bureau of Latvia |access-date=2 February 2025}}</ref>}}
| average gross salary = [[List of European countries by average wage|€1,757]] monthly (2025, May)
| average net salary = [[List of European countries by average wage|€1,305]] monthly (2025, May)
| industries = processed foods, processed wood products, textiles, processed metals, pharmaceuticals, railroad cars, synthetic fibers, electronics
| exports = {{increase}} $20.73 billion (2023)<ref>{{cite web |url=https://eksports.csb.gov.lv/lv/years/products/export/2024 |title=Eksports un imports pa valstīm (eiro) |website=eksports.csb.gov.lv |access-date=21 July 2024}}</ref>
| export-goods = foodstuffs, wood and wood products, metals, machinery and equipment, textiles
| export-partners = {{plainlist|
*{{flag|Lithuania}}(+) 18%
*{{flag|Estonia}}(+) 10%
*{{flag|Germany}}(+) 6%
*{{flag|Russia}}(+) 6%
*{{flag|Sweden}}(+) 5%
*(2022)<ref name="CIALV"/>}}
| imports = {{increase}} $25.49 billion (2023)<ref>{{cite web |url=https://eksports.csb.gov.lv/lv/years/products/import/2024 |title=Eksports un imports pa valstīm (eiro) |website=eksports.csb.gov.lv |access-date=21 July 2024}}</ref>
| import-goods = machinery and equipment, consumer goods, chemicals, fuels, vehicles
| import-partners = {{plainlist|
*{{flag|Lithuania}}(+) 22%
*{{flag|Estonia}}(+) 10%
*{{flag|Germany}}(+) 9%
*{{flag|Poland}}(+) 9%
*{{flag|Russia}}(+) 6%
*(2022)<ref name="CIALV"/>}}
| current account = {{plainlist|
* {{decrease}} −$1.708 billion (2024)<ref name="IMF2024">{{cite web |url=https://www.imf.org/en/Publications/WEO/weo-database/2024/October/weo-report?c=941,&s=BCA,BCA_NGDPD,&sy=2022&ey=2025&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1 |title=World Economic Outlook Database, October 2024 |publisher=[[International Monetary Fund]] |website=IMF.org |access-date=10 February 2025}}</ref>
* {{increase}} 3.75% of GDP (2024)<ref name="IMF2024"/>
}}
| FDI = {{plainlist|
* {{increase}} Inward: $1.32&nbsp;billion (2023)<ref name="OECD">{{Cite web|title=Foreign direct investment (FDI) flows is the value of cross-border transactions related to direct investment over time.|url=https://www.oecd.org/en/data/indicators/fdi-flows.html?oecdcontrol-975b4e0000-var6=DO%7CDI&oecdcontrol-39c7959dfd-var3=2023&oecdcontrol-39c7959dfd-var5=A&oecdcontrol-e522a693d4-var1=ESP&oecdcontrol-e522a693d4-var2=ESP|access-date=10 February 2025|website=[[OECD]]}}</ref>
* {{increase}} Outward: $0.63&nbsp;billion (2023)<ref name="OECD"/> 
}}
| debt = {{plainlist|
*{{decreasePositive}} 43.8% of GDP (2024)<ref>{{cite web |url=https://data.stat.gov.lv/pxweb/en/OSP_PUB/START__VEK__VF__VFV/VFV020c/table/tableViewLayout1/ |title=Government debt |publisher=National Statistical System of Latvia |website=data.stat.gov.lv/ |access-date=8 July 2024}}</ref>
*{{increase}} €19.90 billion (2024)<ref>{{cite web |url=https://data.stat.gov.lv/pxweb/en/OSP_PUB/START__VEK__VF__VFV/VFV020c/table/tableViewLayout1/ |title=Government debt |publisher=National Statistical System of Latvia |website=data.stat.gov.lv/ |access-date=8 July 2024}}</ref>}}
| revenue = 37.8% of GDP (2024)<ref>{{cite web |url=https://www.imf.org/en/Publications/WEO/weo-database/2024/April/weo-report?c=941,&s=TMG_RPCH,TXG_RPCH,GGR,GGR_NGDP,GGX,GGX_NGDP,GGXCNL,GGXCNL_NGDP,GGSB,GGSB_NPGDP,GGXWDN,GGXWDN_NGDP,BCA,BCA_NGDPD,&sy=2024&ey=2024&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1 |title=World Economic Outlook Database, April 2024 |publisher=[[International Monetary Fund]] |website=IMF.org |access-date=8 July 2024}}</ref>
| expenses = 40.8% of GDP (2024)<ref>{{cite web |url=https://www.imf.org/en/Publications/WEO/weo-database/2024/April/weo-report?c=941,&s=TMG_RPCH,TXG_RPCH,GGR,GGR_NGDP,GGX,GGX_NGDP,GGXCNL,GGXCNL_NGDP,GGSB,GGSB_NPGDP,GGXWDN,GGXWDN_NGDP,BCA,BCA_NGDPD,&sy=2024&ey=2024&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1 |title=World Economic Outlook Database, April 2024 |publisher=[[International Monetary Fund]] |website=IMF.org |access-date=8 July 2024}}</ref>
| balance = {{plainlist|
*€1.3 billion deficit (2024)<ref name="1st Notif">{{cite web |title=Council recommendation on the economic, social, employment, structural and budgetary policies of Latvia |url=https://commission.europa.eu/document/download/99667fa7-b0ed-480c-88da-7d31c19cc285_en?filename=com_2024_614_1_en.pdf |website=commission.europa.eu |publisher=European Commission |access-date=21 July 2024}}</ref>
*−2.9% of GDP (2024)<ref name="1st Notif"/>}}
| aid = {{plainlist|
*€4.6 billion from [[Regional policy of the European Union|European Structural and Investment Funds]] (2007–2013)<ref>{{Cite web |url=https://ec.europa.eu/regional_policy/sources/docgener/informat/country2009/lv_en.pdf |title=Archived copy |access-date=25 December 2017 |archive-url=https://web.archive.org/web/20171225203037/https://ec.europa.eu/regional_policy/sources/docgener/informat/country2009/lv_en.pdf |archive-date=25 December 2017 |url-status=live }}</ref>
*€5.63 billion from [[Regional policy of the European Union|European Structural and Investment Funds]] (2014–2020)<ref>{{Cite web |url=https://ec.europa.eu/regional_policy/sources/policy/what/investment-policy/esif-country-factsheet/esi_funds_country_factsheet_lv_en.pdf |title=Archived copy |access-date=25 December 2017 |archive-url=https://web.archive.org/web/20170420135423/https://ec.europa.eu/regional_policy/sources/policy/what/investment-policy/esif-country-factsheet/esi_funds_country_factsheet_lv_en.pdf |archive-date=20 April 2017 |url-status=live }}</ref>}}
| credit = {{plainlist|
*[[Standard & Poor's]]:<ref>{{cite web |title= Sovereigns rating list |publisher=Standard & Poor's |url=https://www.spglobal.com/ratings/en/research/articles/240410-sovereign-ratings-list-13064106|access-date=31 July 2024}}</ref>
*A (Domestic)
*A (Foreign)
*AAA (T&C Assessment)
*Outlook: Stable<ref name=guardian>{{cite news |title=How Fitch, Moody's and S&P rate each country's credit rating |date=15 April 2011 |first1=Simon |last1=Rogers |first2=Ami |last2=Sedghi |work=The Guardian|url=https://www.theguardian.com/news/datablog/2010/apr/30/credit-ratings-country-fitch-moodys-standard |access-date=31 May 2011 |location=London}}</ref>
*[[Moody's]]:
*A3
*Outlook: Stable<ref>{{cite web|url=https://www.moodys.com/research/Government-of-Latvia-A3-stable-Regular-update-Credit-Opinion--PBC_1414418|publisher=[[Moody's]]|year=2024|access-date=31 July 2024|title=Government of Latvia – A3 stable: Regular update; stable outlook}}</ref>
*[[Fitch Group|Fitch]]:
*A−
*Outlook: Stable<ref>{{cite web|title=Fitch Revises Latvia's Outlook to Stable; Affirms at 'A-'
|url=https://www.fitchratings.com/research/sovereigns/fitch-revises-latvia-outlook-to-stable-affirms-at-a-15-11-2024|publisher=[[Fitch Group|Fitch]]|year=2024|access-date=2 February 2025}}</ref>
*Scope:
*A−
*Outlook: Stable<ref>{{cite web|title=Scope affirms the Republic of Latvia’s A- rating with Stable Outlook
|url=https://scoperatings.com/ratings-and-research/rating/EN/179252|publisher=Scope Ratings|year=2025|access-date=5 September 2025}}</ref>}}
| reserves = {{increase}} $4.95 billion (2023 est.)<ref name="CIALV"/>
| spelling = 
}}

The economy of [[Latvia]] is a [[Developed country|developed]] [[mixed economy]]. Part of the [[European single market]], the nation has held accommodative foreign policy is trades extensively. Latvia has been a member of the [[World Trade Organization]] (WTO) since 1999, a member of the [[European Union]] since 2004, a member of the [[Eurozone]] since 2014 and a member of the [[OECD]] since 2016.<ref name="leta010716">{{cite news | title = Latvia becomes full-fledged OECD member | url = http://www.leta.lv/eng/home/important/133A0BDE-1CFF-C571-B077-54B3F50A45E6/ | access-date = 4 July 2016 | agency = [[LETA]] | date = 1 July 2016 | archive-date = 10 August 2016 | archive-url = https://web.archive.org/web/20160810085830/http://www.leta.lv/eng/home/important/133A0BDE-1CFF-C571-B077-54B3F50A45E6/ | url-status = dead }}</ref><ref>{{cite web|url=http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm|title=Members and Observers}}</ref> It is ranked the 14th in the world by the [[Ease of Doing Business Index]] compiled by the [[World Bank Group]].<ref>{{cite web|url=http://www.doingbusiness.org/economyrankings/ |title=Rankings – Doing Business – The World Bank Group |publisher=Doing Business |access-date=6 September 2012}}</ref> According to the Human Development Report 2023-24 by the [[United Nations Development Programme]], Latvia has a HDI score of 0.879 (2022).<ref>[http://hdr.undp.org/en/media/HDR_2011_EN_Table1.pdf Human Development Index and its components] Retrieved 2012-09-06</ref> Due to its geographical location, transit services are highly developed, along with timber and [[wood processing]], agriculture and food products, as well as manufacturing of machinery and electronic devices.

Latvia's economy has had rapid GDP growth of more than 10% per year before it entered a severe recession in 2009 as a result of an unsustainable current account deficit, collapse of the real estate market, and large debt exposure amid the softening world economy. Triggered by the collapse of [[Parex Bank]], the second largest bank, GDP decreased by almost 18% in 2009,<ref>The CIA World Factbook [https://www.cia.gov/the-world-factbook/countries/latvia/ Latvia – CIA – The World Factbook] Retrieved 2012-09-06</ref> and the European Union, the International Monetary Fund, and other international donors provided substantial financial assistance to Latvia as part of an agreement to defend the currency's peg to the euro in exchange for the government's commitment to stringent austerity measures.
In 2011 Latvia achieved GDP growth by 5.5%<ref>{{cite news| url=http://www.baltic-course.com/eng/analytics/?doc=54355 | work= The Baltic Course | title=GDP of Latvia increased by 5.5% in 2011| date= 9 March 2012 | access-date=24 March 2012}}</ref> and thus was again among the fastest growing economies in the European Union. The [[IMF]]/EU program successfully concluded in December 2011.<ref>[http://www.imf.org/external/np/speeches/2012/060512.htm Latvia and the Baltics—a Story of Recovery] by Christine Lagarde managing director, International Monetary Fund Riga, 5 June 2012</ref>

Privatization is mostly complete, except for some of the large state-owned utilities. Export growth contributed to the economic recovery, however, the bulk of the country's economic activity is in the services sector.

==Economic history==

For centuries under [[Hanseatic League|Hanseatic]] and German influence and then during its inter-war independence, Latvia used its geographic location as an important east–west commercial and trading centre. Industry served local markets, while timber, paper and agricultural products were Latvia's main exports. 

Prior to [[World War I]], Latvia was an advanced manufacturing hub within the [[Russian Empire]], primarily serving the Russian market.<ref name=":0">{{Cite journal |last1=Klimantas |first1=Adomas |last2=Norkus |first2=Zenonas |last3=Markevičiūtė |first3=Jurgita |last4=Grytten |first4=Ola Honningdal |last5=Šiliņš |first5=Jānis |date=2023 |title=Reinventing perished "Belgium of the East": new estimates of GDP for inter-war Latvia (1920–1939) |url=https://doi.org/10.1007/s11698-023-00275-y |journal=Cliometrica |volume=18 |issue=3 |pages=765–835 |language=en |doi=10.1007/s11698-023-00275-y |issn=1863-2513|url-access=subscription }}</ref> After attaining independence in 1918, Latvia lost its status as an advanced manufacturing hub.<ref name=":0" /> Latvia sought in the interwar period to become an international exporter of food and to re-industrialize.<ref name=":0" /> Latvia experienced growth in GDP per capita during the interwar period, although some economic historians have argued that there was stagnation in the period of the authoritarian [[Kārlis Ulmanis|Karlis Ulmanis]] regime (1934–1940).<ref name=":0" />

After reestablishing its independence, Latvia proceeded with market-oriented reforms, albeit at a measured pace. Its freely traded currency, the lat, was introduced in 1993 and held steady, or appreciated, against major world currencies. Inflation was reduced from 958.6% in 1992 to 25% by 1995 and 1.4% by 2002.

After contracting substantially between 1991 and 1995, the economy steadied in late 1994, led by a recovery in light industry and a boom in commerce and finance. This recovery was interrupted twice, first by a banking crisis and the bankruptcy of ''Banka Baltija'', Latvia's largest bank, in 1995 and second by a severe crisis in the financial system of neighbouring [[Russia]] in 1998. After 2000, Latvian GDP grew by 6–8% a year for 4 consecutive years. Latvia's state budget was balanced in 1997 but the [[1998 Russian financial crisis]] resulted in large deficits, which were reduced from 4% of GDP in 1999 to 1.8% in 2003. These deficits were smaller than in most of the other countries joining the European Union in 2004.<ref>{{Cite web |title=Latvia Economy, Politics and GDP Growth Summary - The Economist Intelligence Unit |url=https://country.eiu.com/latvia |access-date=2024-07-04 |website=country.eiu.com}}</ref>

Until the middle of 2008, Latvia had the fastest developing economy in Europe. In 2003, GDP growth was 7.5% and inflation was 2.9%. The centrally planned system of the Soviet period was replaced with a structure based on free-market principles. In 2005, private sector share in GDP was 70%.<ref>Ruta Aidis, Friederike Welter: ''[https://books.google.com/books?id=S1yqa7MlLgUC The Cutting Edge: Innovation and Entrepreneurship in New Europe]'', Edward Elgar Publishing, 2008, p. 32</ref> Recovery in light industry and [[Riga|Riga's]] emergence as a regional financial and commercial centre offset shrinkage of the state-owned industrial sector and agriculture. The official unemployment figure was held steady in the 7%–10% range.

===Economic contraction in 2008–2010===
{{Main|2008 Latvian financial crisis|Baltic states housing bubble}}
The [[2008 financial crisis]] severely disrupted the Latvian economy, primarily as a result of the easy credit bubble that began building up during 2004. The bubble burst leading to a rapidly weakening economy, resulting in a budget, wage and unemployment crisis.<ref>{{cite news| url=https://news.bbc.co.uk/2/hi/8496925.stm| publisher=BBC | first=McGuinness | last=Damien | title=In Pictures: Latvia economy reels in recession | date=4 February 2010}}</ref> Latvia had the worst economic performance in 2009, with annual growth rate averaging −18%.

The Latvian economy entered a phase of fiscal contraction during the second half of 2008 after an extended period of credit-based speculation and unrealistic inflation of real estate values. The national account deficit for 2007, for example, represented more than 22% of the GDP for the year while inflation was running at 10%.<ref>{{cite web|url=https://www.cia.gov/the-world-factbook/countries/latvia/|title=Latvia |publisher=[[CIA]]|access-date=15 December 2008}}</ref>
By 2009 unemployment rose to 23% and was the highest in the EU.<ref>{{cite news| url=https://news.bbc.co.uk/2/hi/technology/8533641.stm | publisher=BBC News | title=Robin Hood hacker exposes bankers | date=24 February 2010 | access-date=1 May 2010}}</ref>

[[Paul Krugman]], the Nobel Laureate in economics for 2008, wrote in his ''[[The New York Times|New York Times]]'' Op-Ed column for 15 December 2008:

''"The acutest problems are on Europe's periphery, where many smaller economies are experiencing crises strongly reminiscent of past crises in Latin America and Asia: Latvia is the new Argentina".''<ref>{{cite news|url=https://www.nytimes.com/2008/12/15/opinion/15krugman.html |title=European Crass Warfare |work=[[The New York Times]]|access-date=15 December 2008 | first=Paul | last=Krugman | date=15 December 2008}}</ref>

By August 2009, Latvia's GDP had fallen by 20% year on year, with [[Standard & Poor's]] predicting a further 16% contraction to come. The [[International Monetary Fund]] suggested a [[devaluation]] of Latvia's currency, but the European Union objected to this, on the grounds that the majority of Latvia's debt was denominated in foreign currencies.<ref>{{cite news |url=https://www.telegraph.co.uk/finance/financetopics/financialcrisis/6006322/SandP-downgrades-Baltic-states-debt-ratings.html|archive-url=https://web.archive.org/web/20090813100421/http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6006322/SandP-downgrades-Baltic-states-debt-ratings.html|url-status=dead|archive-date=13 August 2009|title=S&P downgrades Baltic states' debt ratings |last=Evans-Pritchard|first=Ambrose |work=[[The Daily Telegraph]]|location=London |date=10 August 2009}}</ref> Financial economist [[Michael Hudson (economist)|Michael Hudson]] has advocated for redenominating foreign currency liabilities in Latvian lats before devaluing.

However, by 2010 there were indications that Latvia's policy of [[internal devaluation]] was successful.<ref>{{Cite web |url=http://www.bbn.ee/article/2010/02/08/Moody_s_Latvian_economy_is_stabilizing |title=Baltic Business News, 8 February 2010 |access-date=17 January 2012 |archive-date=6 March 2016 |archive-url=https://web.archive.org/web/20160306025950/http://bbn.ee/article/2010/02/08/moody_s_latvian_economy_is_stabilizing |url-status=dead }}</ref>

===Economic recovery 2010–2012===

The economic situation has since 2010 improved,<ref>[http://www.bbn.ee/article/2010/02/08/Moody_s_Latvian_economy_is_stabilizing Moody's: Latvian economy is stabilizing] {{Webarchive|url=https://web.archive.org/web/20160306025950/http://bbn.ee/article/2010/02/08/moody_s_latvian_economy_is_stabilizing |date=6 March 2016 }} Baltic Business News, Retrieved on 3 September 2012</ref> and by 2012 Latvia was described as a success by IMF managing director Christine Lagarde<ref>[http://www.leta.lv/eng/home/important/619F6516-7334-4B81-B10C-8D4FA60B09EF/ Those who change will endure – IMF managing director] {{Webarchive|url=https://web.archive.org/web/20190810223959/http://www.leta.lv/eng/home/important/619F6516-7334-4B81-B10C-8D4FA60B09EF/ |date=10 August 2019 }} [[LETA]] Retrieved on 5 June 2012</ref> showing strong growth forecasts. The Latvian economy grew by 5.5% in 2011<ref>[http://www.danskebanka.lv/en/about/press/2012/danske-bank-expect-latvian-gdp-to-grow/ Danske Bank: we expect Latvian GDP to grow by 2.0% y/y in 2012] Retrieved on 3 September 2012</ref> and by 5.6% in 2012 reaching the highest rate of growth in Europe.<ref>[http://www.macroeconomics.lv/gdp-growth-latvia-56-fastest-europe-growth-moderate-year GDP growth in Latvia, at 5.6%, the fastest in Europe; growth to moderate this year] {{webarchive|url=https://web.archive.org/web/20131022124109/http://www.macroeconomics.lv/gdp-growth-latvia-56-fastest-europe-growth-moderate-year |date=22 October 2013 }}</ref> The GDP surpassed the pre-crisis level in 2018.<ref>{{Cite web|title=GDP (constant 2015 US$) – Latvia {{!}} Data|url=https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?locations=LV|access-date=2021-12-01|website=data.worldbank.org}}</ref>

===Economic issues 2022-23===

The [[Russian invasion of Ukraine]] in February 2022 caused some economic problems in Latvia. Real GDP growth slowed to 2.8 percent in 2022 from 4.3 percent in 2021. Russia was a major trade partner and EU sanctions impacted this. Dramatic rises in the cost of energy, the need to seek alternative sources of gas and oil as well as logistics issues resulted in inflation averaging 17.2% in 2022 before falling back to single digits in 2023.<ref>{{cite web |title=Republic of Latvia: Staff Concluding Statement of the 2023 Article IV Mission |url=https://www.imf.org/en/News/Articles/2023/06/13/mcs061323-republic-of-latvia-staff-concluding-statement-2023-article-iv-mission |date=13 June 2023}}</ref>

==Privatisation==
[[Privatisation]] in Latvia is almost complete. Virtually all of the previously state-owned small and medium companies have been privatized, leaving only a small number of politically sensitive large state companies. In particular, the country's main energy and utility company, [[Latvenergo]] remains state-owned and there are no plans to privatize it. The government also holds minority shares in [[Ventspils Nafta]] oil transit company and the country's main telecom company [[Lattelecom]] but it plans to relinquish its shares in the near future.

Foreign investment in Latvia is still modest compared with the levels in north-central Europe. A law expanding the scope for selling land, including land sales to foreigners, was passed in 1997. Representing 10.2% of Latvia's total foreign direct investment, American companies invested $127 million in 1999. In the same year, the United States exported $58.2 million of goods and services to Latvia and imported $87.9 million. Eager to join Western economic institutions like the [[World Trade Organization]], [[OECD]], and the [[European Union]], Latvia signed a Europe Agreement with the EU in 1995 with a 4-year transition period. Latvia and the United States have signed treaties on investment, trade, and intellectual property protection and avoidance of double taxation.

== Employment ==
[[File:Employed-unemployed in Latvia 1996-2017.svg|thumb|400px|Employed-unemployed in Latvia in workforce 15–74 years old (thousand people) 1996-2017 and chain-linked GDP reference year 2010 (bln EUR). Data: [http://data.csb.gov.lv/pxweb/en/Sociala/Sociala__ikgad__nodarb/NB0010.px/table/tableViewLayout2/?rxid=a79839fe-11ba-4ecd-8cc3-4035692c5fc8 Statistics Latvia]]]
[[File:Latvia average wage, 2017.svg|thumb|400px|
<div style="float: right;">
{{Legend|#C8007E|{{0}}510-{{0}}593}}
{{Legend|#E148AF|{{0}}594-{{0}}676}}
{{Legend|#F4A1DC|{{0}}677-{{0}}759}}
{{Legend|#FED8F0|{{0}}760-{{0}}842}}
{{Legend|#E1FFCC|{{0}}843-{{0}}925}}
{{Legend|#ACFA79|{{0}}926-1008}}
{{Legend|#6ED81C|1009-1091}}
{{Legend|#39AA00|1092-1170}}
</div>
Average monthly gross wages in cities under state jurisdiction and counties (in euro) 2017. Excluding private sector enterprises with number of employees < 50.
Data: [http://data.csb.gov.lv/pxweb/en/Sociala/Sociala__ikgad__dsamaksa/DS0070_euro.px/?rxid=cdcb978c-22b0-416a-aacc-aa650d3e2ce0 Central Statistical Bureau of Latvia] ]]

Average wages are higher in Riga and Ventspils and their surroundings, with inland border regions lagging behind, mainly the region of Latgale.<ref>{{Cite web |title=Figure 5. Average monthly salary (in euro) of employed people in Latvia... |url=https://www.researchgate.net/figure/Average-monthly-salary-in-euro-of-employed-people-in-Latvia-2019-Source-Central_fig5_352781284 |archive-url=https://web.archive.org/web/20230409183306/https://www.researchgate.net/figure/Average-monthly-salary-in-euro-of-employed-people-in-Latvia-2019-Source-Central_fig5_352781284 |archive-date=9 April 2023 |access-date=2025-01-06 |website=ResearchGate |language=en |url-status=live }}</ref>

==Sectors==
=== Primary ===

==== Agriculture ====
{{main|Agriculture in Latvia}}
Latvia produced in 2018:

* 1.4 million tons of [[wheat]];
* 426 thousand tons of [[potato]];
* 306 thousand tons of [[barley]];
* 229 thousand tons of [[rapeseed]];
* 188 thousand tons of [[oat]];
* 81 thousand tons of [[rye]];
* 80 thousand tons of [[bean]];

In addition to smaller productions of other agricultural products.<ref>[http://www.fao.org/faostat/en/#data/QC/ Latvia production in 2018, by FAO]</ref>

=== Manufacturing ===
*[[Ogres Knitwear]], since 1965

=== Services ===
{{main|Tourism in Latvia}}

In 2022, the sector with the highest number of companies registered in Latvia is Services with 71,692 companies followed by Retail Trade and Finance, Insurance, and Real Estate with 15,300 and 10,287 companies respectively.<ref>{{cite web | url=https://www.hithorizons.com/eu/analyses/country-statistics/latvia | title=Industry Breakdown of Companies in Latvia | website=HitHorizons}}</ref>

==Corporations==
===Most valuable companies===
Largest Latvian companies by valuation (EUR € billions) according to [[Prudentia]] and [[Nasdaq Riga]] (2024).<ref>{{cite web | title=Latvia's most valuable enterprises &#124; Top101.lv | url=https://top101.lv/en/ }}</ref>

{| class="wikitable sortable" style="text-align:right;"
|- style="background:#efefef;"
! style="text-align:center;"| Rank|| style="text-align:center;"| Name|| style="text-align:center;"| Headquarters|| style="text-align:center;"| Valuation<br />(bil.&nbsp;€) || style="text-align:center;"| Industry<br />
|-
| style="text-align:center;"| {{0}}1 {{same position|a}} || style="text-align:left;"| [[Swedbank|Swedbank Baltics]], AS || style="text-align:left;"| [[Riga]] || 4.345 {{rise|a}} || style="text-align:left;"| [[Bank]]ing
|-
| style="text-align:center;"| {{0}}2 {{same position|a}} || style="text-align:left;"| [[Latvenergo]], AS || style="text-align:left;"| Riga || 4.024 {{rise|a}} || style="text-align:left;"| [[Energy]]
|-
| style="text-align:center;"| {{0}}3 {{same position|a}} || style="text-align:left;"| {{ill|Latvijas valsts meži|lv}}, AS || style="text-align:left;"| Riga || 1.657 {{fall|a}} || style="text-align:left;"| [[Forestry]]
|-
| style="text-align:center;"| {{0}}4 {{same position|a}} || style="text-align:left;"| [[MikroTik|Mikrotīkls]], SIA || style="text-align:left;"| Riga || 0.992 {{fall|a}} || style="text-align:left;"| [[Networking hardware|Network equipment]]
|-
| style="text-align:center;"| {{0}}5 {{same position|a}} || style="text-align:left;"| [[Maxima Group|Maxima Latvija]], SIA || style="text-align:left;"| Riga || 0.816 {{rise|a}} || style="text-align:left;"| [[Retail]]
|-
| style="text-align:center;"| {{0}}7 {{rise|a}} || style="text-align:left;"| [[SEB banka]], AS || style="text-align:left;"| {{ill|Valdlauči|lv}} || 0.590 {{rise|a}} || style="text-align:left;"| [[Bank]]ing
|-
| style="text-align:center;"| {{0}}8 {{fall|a}} || style="text-align:left;"| [[LMT (company)|Latvijas Mobilais Telefons]], SIA || style="text-align:left;"| Riga || 0.560 {{rise|a}} || style="text-align:left;"| [[Telecommunications industry|Telecommunications]]
|-
| style="text-align:center;"| {{0}}9 {{rise|a}} || style="text-align:left;"| [[Citadele Banka]], AS || style="text-align:left;"| Riga || 0.507 {{rise|a}} || style="text-align:left;"| [[Bank]]ing
|-
| style="text-align:center;"| {{0}}10 {{same position|a}} || style="text-align:left;"| [[Rimi Baltic|Rimi Latvia]], SIA || style="text-align:left;"| Riga || 0.499 {{rise|a}} || style="text-align:left;"| [[Retail]]
|-
| style="text-align:center;"| {{0}}11 {{rise|a}} || style="text-align:left;"| [[Tele2#Latvia|Tele2]], SIA || style="text-align:left;"| Riga || 0.425 {{rise|a}} || style="text-align:left;"| [[Telecommunications industry|Telecommunications]]
|-
| style="text-align:center;"| {{0}}12 {{fall|a}} || style="text-align:left;"| [[Elko Grupa]], AS || style="text-align:left;"| Riga || 0.402 {{fall|a}} || style="text-align:left;"| [[Wholesale]] of [[Electronics industry|electronics]]
|}

==Infrastructure==

=== Energy ===
{{main|Energy in Latvia}}
[[File:Pļaviņu HES ar atvērtām slūžām.JPG|thumb|[[Pļaviņas Hydroelectric Power Station]]]]
[[File:GDP_per_capita_Baltics.svg|thumb|right|Real GPD per capita development of Estonia, Latvia and Lithuania]]

Most of [[List of power stations in Latvia|Latvian electricity]] is produced with Hydroelectricity. The largest hydroelectric power stations are [[Pļaviņas Hydroelectric Power Station]], [[Riga Hydroelectric Power Plant]] and [[Ķegums Hydroelectric Power Station]].

In 2017 about 4381 GWh were produced in hydro power and 150 GWh in wind power. There are plans to increase Wind electricity production under the 2021-2030 energy plan.

Latvia used to import 100% of its [[Russia in the European energy sector|natural gas from Russia]],<ref>"[https://www.e3g.org/docs/E3G_Trends_EU_Gas_Demand_June2015_Final_110615.pdf Europe's Declining Gas Demand: Trends and Facts about European Gas Consumption – June 2015]". (PDF). p.9. [[E3G]]. Source: Eurostat, Eurogas, E3G.</ref> until its import was banned in January 2023.

=== Transport ===
{{main|Transport in Latvia}}
Key ports are located in [[Riga]] ([[Freeport of Riga]] and [[Riga Passenger Terminal]]), [[Ventspils]] ([[Free port of Ventspils]]), and [[Liepāja]] ([[Port of Liepāja]]). Most transit traffic uses these and half the cargo is [[Petroleum|crude oil]] and oil products.

[[Latvian Railways]] is the main state-owned railway company in Latvia. Its daughter companies both carry out passengers services as well as carry a large quantity of freight cargo, and freight trains operate over the whole current passenger network, and a number of lines currently closed to passenger services.

[[Riga International Airport]] is the only major airport in Latvia, carrying around 5 million passengers annually. It is the largest airport in the [[Baltic state]]s and has direct flights to over 80 destinations in 30 countries. It is also the main hub of [[airBaltic]].

==See also==
*[[Baltic Tiger]]
*[[Baltic states housing bubble]]
*[[Economy of Europe]]

==References==
{{Reflist}}<!--added above categories/infobox footers by script-assisted edit-->

==External links==
* [http://www.thenation.com/doc/20091116/rizga/single Latvia's Tiger Economy Loses Its Bite] {{Webarchive|url=https://web.archive.org/web/20100425051937/http://www.thenation.com/doc/20091116/rizga/single |date=25 April 2010 }} by Kristina Rizga, ''[[The Nation]]'', 28 October 2009
* [http://www.cepr.net/documents/publications/latvia-2011-12.pdf Latvia's Internal Devaluation: A Success Story?], from the [[Center for Economic and Policy Research]], December 2011
* [http://ec.europa.eu/economy_finance/eu/countries/latvia_en.htm European Commission's DG ECFIN's country page on Latvia.]
* [http://wits.worldbank.org/CountryProfile/Country/LVA/Year/2012/Summary World Bank Summary Trade Statistics 2012]
{{Latvia topics}}
{{Members_of_the_European_Union_(EU)}}
{{Economy of Europe}}

{{DEFAULTSORT:Economy of Latvia}}
[[Category:Economy of Latvia| ]]
[[Category:European Union member economies|Latvia]]
[[Category:OECD member economies|Latvia]]
[[Category:Economies of Europe by country|Latvia]]