Latvia Economic Outlook
A small, open economy:
Latvia, with a GDP of around $40 billion, is a small but dynamic economy in the Baltic region. As a member of the eurozone, Latvia benefits from trade and investment ties with the EU, particularly with its Nordic neighbors. However, economic growth has slowed in recent years due to inflationary pressures, weak exports, and the impact of Russia’s war in Ukraine. Latvia has worked to diversify its economy, but it remains vulnerable to external shocks.
Key industries and trade partners:Latvia’s economy is largely export-driven, with key industries including logistics, timber, and manufacturing. The country has a well-developed financial services sector and is an important transit hub between Europe and Asia. However, the loss of trade with Russia—previously a key economic partner—has forced Latvia to realign its trade ties toward the EU and Nordic countries. The IT sector has also seen strong growth, positioning Latvia as an emerging hub for digital services.
Challenges:Latvia faces several challenges, including a declining population, labor shortages, and high inflation. Inflation reached double digits in 2022, squeezing household incomes and slowing consumption. The country also struggles with income inequality and a relatively high debt-to-GDP ratio compared to other Baltic states. Additionally, structural reforms are needed to boost productivity and attract more investment.
Latvia’s economic outlook:The Latvian economy is expected to grow at a moderate pace, driven by EU funding, digital transformation, and increased trade with Western Europe. However, risks remain, particularly related to inflation, demographic decline, and energy security. Investments in infrastructure and innovation will be crucial for sustaining long-term competitiveness.
Latvia's Macroeconomic Analysis:
Nominal GDP of USD 42.2 billion in 2023.
Nominal GDP of USD 43.5 billion in 2024.
GDP per capita of USD 23,149 compared to the global average of USD 10,589.
GDP per capita of USD 22,435 compared to the global average of USD 10,589.
Average real GDP growth of 2.2% over the last decade.
Average real GDP growth of 2.4% over the last decade.
Sector Analysis
In 2022, services accounted for 63.1% of overall GDP, manufacturing 11.9%, other industrial activity 20.8%, and agriculture 4.2%. Looking at GDP by expenditure, private consumption accounted for 61.1% of GDP in 2023, government consumption 19.7%, fixed investment 23.0%, and net exports -3.8%.International trade
In 2023, manufactured products made up 56.4% of total merchandise exports, mineral fuels 7.3%, food 16.5%, ores and metals 1.7% and agricultural raw materials 9.1%, with other categories accounting for 9.0% of the total. In the same period, manufactured products made up 62.0% of total merchandise imports, mineral fuels 11.0%, food 13.1%, ores and metals 1.2% and agricultural raw materials 1.6%, with other goods accounting for 11.1% of the total. Total exports were worth USD 19.70 billion in 2024, while total imports were USD 23.30 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 2.4% in the decade to 2023. To read more about GDP growth in Latvia, go to our dedicated page.
Fiscal policy
Latvia's fiscal deficit averaged 2.3% of GDP in the decade to 2023. Find out more on our dedicated page.
Unemployment
The unemployment rate averaged 8.1% in the decade to 2024. For more information on Latvia's unemployment click here.
Inflation
Inflation averaged 3.7% in the decade to 2024. Go to our Latvia inflation page for extra insight.
Monetary Policy
Euro Area monetary policy rate ended 2024 at 3.15%, up from 0.05% a decade earlier. See our Latvia monetary policy page for additional details.
Exchange Rate
From end-2014 to end-2024 the euro weakened by 20% vs the U.S. dollar. For more info on the euro, click here.
Economic situation in Latvia
After shrinking the most in over a year in Q3, GDP contracted again in Q4 in annual terms. Both public and private spending lost steam from the prior quarter, and the fall in fixed investment sharpened compared to Q3. That said, exports stabilized after nearly two years of decline. As a result, the economy contracted in 2024 as a whole, marking the worst performance in four years. Turning to 2025, the economy should be returning to expansion; our panelists see annual GDP growth at a six-quarter high in Q1. Available data is supportive. In January, industrial output rebounded from Q4’s downturn thanks to improving manufacturing activity, as did merchandise exports. Additionally, retail sales growth inched up from Q4 in the same month, though it was likely capped by higher inflation and weaker consumer confidence.Latvia Economic Forecasts
Projections out to 2034.50 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 15 expert analysts.
Want to get insight on the economic outlook for Latvia in the coming years? FocusEconomics collects projections out to 2034 on 50 economic indicators for Latvia from a panel of 15 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Latvia economy. To download a sample report on the Latvia's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.