Latvia

Economic and political outline

Economic indicators | Foreign Trade in figures | Sources of economic information | Political outline

Economic indicators

After its independence from former Soviet Union, Latvia has successfully implemented market-oriented reforms. IMF noted that Latvia's economic performance during past several years has been among the best within the EU accession countries The GDP growth rate was 11.9% in 2006 and 10.5% in 2007. This good performance is mainly due to continuous growth in domestic consumption and inflow of foreign investment. Furthermore, Latvia became a member of the EU on the 1st of May 2004 and now benefits from European subsidies: 1.8 billion euros have been granted for the period 2004 to 2008. Latvia benefits from its skilled and cheap workforce. Two major weaknesses of the economy are: high trade deficit and huge external debt. Inflation remains around 6.5%, but the unemployment rate is high (9% in 2007). Economic forecasts are less optimistic for 2008, waiting for annual growth rate of 6.2% only.

GDP Indicators	2004	2005	2006	2007	2008
GDP (billions USD)	13.76	16.04	20.10	27.00e	32.34e
GDP (constant prices, annual % change)	8.7	10.6	11.9	10.5e	6.2e
GDP per capita (USD)	5,933.75	6,955.25	8,760.11	11,826.20e	14,233.70e
Inflation rate (%)	6.2	6.7	6.5	9.0e	8.9e
Unemployment rate (% of the labor force)	10.4	8.7	6.8	n.c.	n.c.
Current Account (billions USD)	-1.78	-2.01	-4.24	-6.83e	-8.82e
Current Account (in % of GDP)	-12.9	-12.6	-21.1	-25.3e	-27.3e

Source: IMF - World Economic Outlook Database; ILO, Laborstat - Yearly Statistics

Note: (e) Estimated data

Socio-demographic indicators	2004	2005	2006
Unemployment rate (%)	10.4	8.7	6.8

Source:

Main sectors of industry

The agricultural sector contributes nearly 4% to the GDP and employs more than 15% of the population. The agriculture sector is dominated by animal breeding, besides producing grains, sugar beets, potatoes, and vegetables. Apart from timber, which is largely exported, Latvia has almost no natural resources. The country has to import all its energy products, mainly from Russia. The industrial sector contributes nearly 22% to GDP and employs about 40% of the workforce. Building & construction, metallurgy, food-processing, and mechanic engineering are booming sectors. Tourism has developed as a major source for foreign exchange earnings. The Latvian economy is driven by services sector which contributes nearly 74% to GDP. Almost all of the previously state-owned small and medium companies have been privatized; private sector now accounts for more than 75% of the GDP.

Breakdown of economic activity by sector	Agriculture	Industry	Services
Value added (annual % change)	-0.3	8.2	13.1
Value added (in % of GDP)	3.7	21.5	74.8
Employment by sector (in % of total employment)	12.1	25.8	61.8

Source: World Bank - World Development Indicators - last available data.

Monetary indicators	2002	2003	2004	2005	2006
Average annual exchange rate for 1 USD	0.62	0.57	0.54	0.56	0.56

Source: World Bank - World Development Indicators

Foreign trade in figures

The Latvian market is open and competitive. The EU is Latvia's largest trade partner. The share of foreign trade in country’s GDP is arround 78%. The top three export partners of Latvia are: Lithuania, Estonia, and Germany. The country mainly exports wood and charcoal, mineral fuels & oils, iron & steel, machinery, and electric & electronic equipment. The top three import partners are: Germany, Lithuania and Russia. Latvia mainly imports mineral fuels & oils, machinery, vehicles, electric equipment, and iron & steel.

Foreign trade indicators	2002	2003	2004	2005	2006
Imports of goods (millions USD)	4,024	5,173	7,002	8,379	10,992
Exports of goods (millions USD)	2,545	3,171	4,221	5,361	6,051
Imports of services (millions USD)	701	929	1,178	1,557	1,984
Exports of services (millions USD)	1,238	1,506	1,780	2,165	2,670
Imports of goods and services (annual % change)	4.7	13.1	16.6	14.8	17.5
Exports of goods and services (annual % change)	5.4	5.2	9.4	20.3	5.3
Imports of goods and services (in % of GDP)	50.6	54.6	59.6	62.2	64.4
Exports of goods and services (in % of GDP)	40.9	42.1	44.0	47.8	44.2
Trade Balance (millions USD)	-1,479	-2,003	-2,781	-3,018	-4,941
Trade Balance (including service) (millions USD)	-942	-1,427	-2,179	-2,410	-4,255
Current Account (millions USD)	-625	-921	-1,774	-2,002	-4,280
Current Account (in % of GDP)	-6.7	-8.2	-12.9	-12.5	-21.3
Foreign trade (in % of GDP)	91.5	96.7	103.5	110.1	108.6

Source: World Bank - World Development Indicators

Main partner countries

Main customers (% of exports)	2006
Lithuania	14.7%
Estonia	12.7%
Germany	10.1%
Russia	8.9%
United Kingdom	7.8%

Main suppliers (% of imports)	2006
Germany	15.5%
Lithuania	13.0%
Russia	7.8%
Estonia	7.7%
Poland	7.2%

Source: 2006

Main products

Main exports (% of exports)	2006
Wood and articles of wood, wood charcoal	22.4%
Iron and steel	9.3%
Mineral fuels, mineral oils	5.3%
Vehicles other than railway or tramway	4.9%
Electrical machinery and equipment	4.9%

Main imports (% of imports)	2006
Vehicles other than railway or tramway	12.9%
Mineral fuels, mineral oils	12.8%
Machinery and mechanical appliances	11.6%
Electrical machinery and equipment	8.0%
Iron and steel	4.1%

Source: 2006

To see more products: More imports (Intracen Data)
More exports (Intracen Data)

Sources of economic information

Ministries: Ministry of Economics
Statistical Office: Central Statistical Bureau
Central Bank: Central Bank of Latvia
Stock Exchange: Nordic Exchange
Online newspapers: Biznes & Baltik (in Latvian)
Diena (in Latvian)
Search Engines: Search Latvian
TV net
Economic portals: The Baltic Times

Political outline

Executive Power: President is the chief of state and is elected by the parliament in a separate election for a four year term. President is the commander-in-chief of the armed forces. President appoints the Prime Minister as head of the government who in turn has to receive a confidence vote by the parliament and serves a four year term. Prime Minister enjoys the 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 executive branch of 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.
Main political parties: Latvia has a multi-party system, where no one party often has a chance of gaining power alone, and parties must work with each other to form coalition governments. Some of the major parties in the country are:
- JL (New Era Party) – a right-wing political party, advocates reforms in health-care and education;
- TP (People's Party) – a conservative pro-EU political party;
- LPP (First Party of Latvia) – advocates populist ideology, supported by Church;
- ZZS (Latvian Green Party) – a left-of-centre environmentalism political alliance;
- TB/LNNK (For the Fatherland and Freedom) – a nationalist political party, involved in country’s independence movement.
Current political leaders: President: Valdis ZATLERS (since July 2007) – Popular Front of Latvia
Prime Minister: Ivars GODMANIS (since December 2007)
Next election dates: Presidential: Year 2011
Parliamentary: Year 2010