In order to raise Latvian residents' standard of living and economic prosperity more rapidly, and taking into account the extremely swift geopolitical, economic and technological changes of recent years, the Ministry of Economics has prepared a new Latvian economic growth strategy.
Its principal target outcome is to double the size of the economy over the next ten years, bringing Latvia's gross domestic product (GDP) to 83 billion EUR by 2035. This is to be achieved by significantly raising the productivity of Latvian companies – from 60% of the EU average in 2023 to the EU average level in 2035. The use of innovation and the latest technologies, including artificial intelligence, is set out as an important element in achieving rapid growth, as is national excellence in the green economy, renewable energy and bioeconomy sectors.
"The challenging new situation in the Latvian and wider European economy also requires the government to take a fresh look at things. In previous years, national economic policy was not implemented in a purposeful manner, which gradually left Latvia lagging behind our closest neighbours. However, I am convinced that we have considerable potential, and unlocking it requires a set of specific measures across several directions – securing funding for the expansion of business and exports, developing human capital, reducing bureaucracy, attracting foreign investment, and promoting innovation and the most modern technologies. And, of course, Latvia, already one of the greenest countries in Europe, must make use of its potential in the fields of renewable energy, hydrogen technologies and the bioeconomy, becoming both a net exporter of electricity and a leader in the development of green technologies," emphasises Minister for Economics Viktors Valainis.
In the medium term, the new economic growth strategy envisages gross domestic product growth of 4-5% per year, provided that inflation remains stable within the 2% range. It is likewise necessary to secure labour resources of at least 900 thousand employed people per year, to increase the share of exports to at least 80% of GDP, and to ensure an annual volume of private investment of at least 25% of GDP. Productivity-based growth is expected to deliver an increase in the average gross monthly wage to at least 3200 euros over the next 10 years.
How can this be achieved?
A fundamental precondition for Latvia's development is to base the economy's competitive advantages on technological factors, production efficiency and innovation, as well as on the ability to adapt to and make use of the opportunities created by global change.
To deliver the government's economic goal, the availability of funding to businesses must be substantially improved and investment must be actively attracted into the economy. Targeted state investment in the economy is required, which, together with investment from EU funds, including the Recovery Fund, will provide significant support for raising our entrepreneurs' productivity, digitalisation, energy efficiency, export capacity and competitiveness, which in turn will secure growth in Latvia's economy and an increase in the volume of exports. At the same time, this calls for a responsibility to invest productively, so as not to create additional pressure on inflation.
The main courses of action for increasing the competitiveness of Latvia's economy:
- INVESTMENT IN HUMAN CAPITAL, by raising the quality of education and public health, and improving the processes of retraining and upskilling, more efficient use of the workforce, and the attraction of talent and a high-quality workforce;
- COMPETITIVE BUSINESS, by channelling resources into company development and modernisation and the implementation of new business ideas, providing support for corporate competitiveness and for the development of innovation systems and digitalisation, as well as reducing bureaucracy and digitally transforming public administration;
- REGIONALLY BALANCED GROWTH, by fostering the creation of well-paid jobs and globally competitive companies, and ensuring the connectivity of regional centres and access to high-quality public services;
- MODERN INFRASTRUCTURE AND AFFORDABLE HOUSING, by reducing bureaucratic obstacles to property development, promoting the renovation of the building stock and its alignment with climate neutrality, developing the market for affordable low-rent housing and transport infrastructure, and providing widely available public transport mobility services;
- CLIMATE CHANGE AND INVESTMENT IN GREEN INFRASTRUCTURE, by promoting energy independence and implementing ambitious renewable energy projects.
The informative report on the development of Latvia's economy, "THE LATVIAN ECONOMY – PRODUCTIVITY, COMPETITIVENESS, GROWTH" (see the informative report), has been prepared in order to prompt discussion and public debate in the Saeima on the challenges facing Latvia's economic development and the country's growth priorities. Debates on these matters will take place in the Saeima on 16 May this year, to discuss the country's development priorities together.