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Economic Development of Latvia Report Ministry of Economics Republic of Latvia ECONOMIC DEVELOPMENT OF LATVIA REPORT Riga, June 2013 Ministry of Economics Republic of Latvia ECONOMIC DEVELOPMENT OF LATVIA REPORT RIGA JUNE 2013 Comments, questions or suggestions are welcomed: Ministry of Economics of the Republic of Latvia 55 Brivibas Street, Riga, LV-1519, Latvia Telephone 371-67013293 Fax 371-67280882 E-mail: [email protected] Website: http://www.em.gov.lv Authors: O. Barānovs (overall compilations, 1, 4.1.1), I. Skribāne (2, 3.1.3, 4.3, 5.2), E. Gergelevičs (2, 3.1.4), L. Stelmaka (3.1.1, 3.1.2, 4.1.2, 4.1.3, 5.1, 5.2), J. Salmiņš (3.2.1, 3.2.2, 3.3), V. Skuja (4.4), I. Šnīdere (4.2), N. Ozols (5.3), J. Ušpelis (5.4), R. Rimša (6.1.1), Č. Gržibovskis(6.1.2), A. Jansons (6.2.1), D. Klinsone, L .Stauvere, J. Zakovics(6.2.2), G. Jaunbērziņa-Beitika(6.2.3), I. Beināre, K. Soms (6.3), D. Dravnieks(6.4), M. Auders, E. Avota, M. Deņisova, Dz. Grasmanis, D. Suveizda, R. Špade(6.5), I. Jankava, I. Šīrava (6.6), I. Lore (6.7, 6.8), A. Krūze (6.8, 6.12), L. Saliniece (6.9), L. Neiders (6.10), M. Stenders (6.11), L. Zemīte, I. Žunde(6.13), J. Maurāns, B. Mistre, I. Pilmanis, O. Veilande (6.14), L. Dreija(6.15, 6.16), D. Freimane (6.17). All figures and data, except for specifically indicated cases, have been obtained from the Central Statistical Bureau of the Republic of Latvia. The data of the European Union have been obtained from the Eurostat. The data of the Bank of Latvia and the Financial and Capital Market Commission have been used in the description of balance of payments and the bank and monetary indicators of Latvia. The data of the Treasury have been used in the description of financial indicators. ISSN 1407-4109 © Ministry of Economics of the Republic of Latvia, 2013 Reference mandatory in case of reprinting and quoting Dear reader! significant step towards improving the quality of our economy and business environment. The invitation to The experts of the Ministry of Economics have become a full member of the group of world’s most prepared the regular Report on the Economic developed countries is acknowledgement and the Development of Latvia. The first Report was result of the active work of experts from the entire published in September 1994 and the following public administration and sectors for several years. Reports since 1995 were published traditionally twice a The status of an OECD member will raise the profile year – in June and December. The present Report, just of the country outside the EU, making Latvia more like the previous ones, provides an evaluation of the attractive for investments and giving businesses easier state’s economic situation and policy, as well as gives a access to credit markets for the implementation of forecast of development perspectives of the economy. their development plans and projects. The economy of Latvia keeps successfully However, in order to maintain long-term economic recovering from the crisis. In 2012, the GDP increased growth, one of the main objectives and challenges will by 5.6%, while in the 1st quarter of 2013, GDP was by be the increase of productivity. Higher productivity in 3.6% higher than in the 1st quarter of the previous both the private and public sector will be a year. Latvia has been one of the fastest growing precondition for a rise in wages and thus – for the economies in the European Union for several quarters overall social welfare. Our aim is to help enterprises in a row. Moreover, we have been able not only to develop, produce high profitability goods and services, grow, but also to implement structural changes in the and create new, well-paid jobs through the National economy and to turn public finances in a more Industrial Policy (NIP) that has been approved by the sustainable direction. Over the past few years, exports Cabinet of Ministers on May 28, 2013. As a cross- have become the key driver of economy. The export industry policy the NIP envisages implementation of volumes of goods and services have reached the activities in such areas as access to labour and highest level ever, and the total exports exceed the improvement of skills, access to industrial space and highest point of the pre-crisis period by 20 per cent. territories, access to finance, promoting innovations, Previously, the increase in exports allowed also exports and limiting costs of energy resources. trade and construction sectors to recover from the A regular and tight dialogue with industry crisis. Considering the deep drop of both sectors associations and businesses is an essential part of the during the crisis, currently the increase in these sectors NIP that may help the country to obtain more specific causes no concerns about any potential bubbles. information about the situation in sectors. The However, it is essential to maintain the balance and Ministry of Economics has consulted with the largest continue targeted structural economic changes in industry associations and non-governmental favour of manufacturing and other exporting sectors. organisations representing enterprises at each stage of At the same time, the uncertainty about global NIP implementation, thus obtaining the necessary economic growth perspectives forces us to take a information on the principles and main micro-level cautious attitude towards the economic growth challenges of the economy. perspectives of Latvia in 2013. Therefore, the experts A number of pilot projects are being implemented of the Ministry of Economics have forecasted a more as well, for instance, green industry innovations and moderate, however relatively strong economic growth establishment of industrial areas in regions. Yet, of Latvia in 2013 than it was in 2012, and the GDP successful and efficient implementation of the NIP is might reach 4.5 per cent. closely linked with collaboration of all involved parties, Recovery of the Latvian economy has been also and regular and constructive cross-industry dialogue. recognized internationally. Latvia has received the Implementation of the NIP will be limited and less Convergence Reports of the European Comission and productive without reforms in education system, the European Central Bank indicating that Latvia has labour market policy or the approach of local met all Maastricht criteria to successfully join the euro governments in dealing with businesses. Dialogue and zone countries in 2014. Such a positive assessment common vision often play an even more important serves as recognition of the changes achieved in the role than the available funding, which currently is Latvian economy. Joining the euro zone will help allocated for the NIP measures in the amount of ensuring sustainable growth of the entire country, thus LVL 700 million. reducing the various costs for people and businesses Along with the NIP, the Cabinet of Ministers related to currency exchange and creating a more approved also the Guidelines for Export Promotion of stable business and investment environment. Latvian Goods and Services and Attraction of Foreign The invitation to start negotiations on accession of Investment in 2013-2019 on May 28, 2013. Improvement Latvia to the Organisation for Economic of competiveness of Latvian enterprises, targeted Co-operation and Development (OECD) is a measures to attract foreign direct investments and support to enterprises for accessing foreign markets shares more efficient, transparent and responsible, the are the key strategic objectives defined in the Saeima must adopt the Draft Law on the Management of guidelines that will ensure favourable environment for Capital Companies and Capital Shares of Public Persons, as investments in Latvia and promote its international well as amendments to related laws. The reform is recognition and facilitate entry of Latvian enterprises aimed at promoting quality and professional in foreign markets. management of capital companies and capital shares of I believe that foreign direct investments play an public persons according to internationally recognized important role in promotion of further economic principles of good corporate governance, as well as growth in Latvia both through acquisition of industrial meeting conditions for commercial activities of public and management skills and creation of new jobs, thus persons. After adopting the laws, establishment of the giving an opportunity to apply new technologies and State Capital Shares Management Bureau will be preconditions for technology transfer, promoting launched and state capital shares will be gradually integration of the country in international trade and transferred to the bureau thus introducing appropriate involvement of enterprises in industrial sales chains. principles of activity and supervision in all state and I am satisfied with the completion of the local government enterprises according to the good elaboration, coordination and adoption of the Energy governance practice. Long-Term Strategy 2030 this year. On May 28, 2013, the One of the key priorities of the Ministry of government approved the informative report Latvian Economics is implementation of the Remigration support Energy Long-Term Strategy 2030 – Competitive Energy for measure plan to provide qualitative and coordinated Society prepared by the Ministry of Economics. It is the public and local government services to those people first energy industry document of such level in Latvia. who have decided to return to Latvia. The main objective of the Strategy 2030 is to promote In order to achieve the set objectives, we will competitive economy by developing energy policy that continue the active dialogue with entrepreneurs and is well-balanced, effective, as well as economically, non-governmental organizations representing them. socially, and ecologically reasonable and based on The present Report provides information about the market principles. main economic and social indicators, development of The Ministry of Economics has started working on economy sectors and external economic environment, development of necessary legislation and planning the economic policy of the government for fostering documents to achieve the long-term energy policy growth and employment, as well as the key objectives of Latvia under the Strategy 2030.
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