Economic Development of Latvia

ECONOMIC DEVELOPMENT OF LATVIA RIGA 2019 ISSN 2661-5118 Ministry of Economics Republic of Latvia ECONOMIC DEVELOPMENT OF LATVIA RĪGA 2019 Comments, questions or suggestions are welcome: Ministry of Economics of the Republic of Latvia Brīvības iela 55, Rīga, LV-1519 Phone: 371-67013100 Fax: 371-67280882 E-mail: [email protected] Website: http://www.em.gov.lv Review prepared by: O.Barānovs (editor, 1., 6.5.), T.Buls (2.), I.Šnīdere (3.1., 3.2., 4.1., 4.3., 4.4., 4.6., 4.7., 4.8., 4.9., 6.1.), L.Stelmaka-Leja (3.2., 6.6.), I.Skribāne (3.3., 6.2., 6.3., 6.7., 6.9.), E.Gergelevičs (3.4., 4.2.), J.Ušpelis (4.5.), J.Salmiņš (5.), V.Skuja (6.4.), L.Neiders (6.8., 6.9.), N.Ozols (7.1., 7.2., 7.3., 7.4.), A.Rožkalne (7.4.), U.Rogule-Lazdiņa (7.4.), Č.Gržibovskis (8.1., 8.2.), E.Matisone, G.Silovs (8.2.), J.Reinsone (8.3.), E.Kudure (8.3., 9., 16., 17.), J.Zakovics, D.Vaivare, I.Baltābola, I.Vanka-Krilovska, S.Siliņa, A.Šmukste (9.), M.Jansons, V.Krūmkoka, L.Silakaktiņa, E.Ozoliņš-Ozols, A.Zimele, I.Raudiņa (10.), M.Ambrēna (10., 11.1.), L.Bergholde (11.1.), I.Baltābola, L.Bauze, D.Klinsone (11.2.), T.Stūrītis, Ģ.Blumers, M.Kokalis (11.3), D.Armane, I.Karpoviča (12.1.), A.Pētersone, L.Kundziņa (12.2.), L.Dreijalte, M.Ramanis (12.3.), H.Rimša (12.4.), I.Beināre (13.), R.Lastovska (14.), I.Kalniņa, S.Voroncova (15.), P.Vilsone, J.Račko (16.), K.Riekstiņa (17.) All figures and data, unless indicated otherwise, have been obtained from the Central Statistical Bureau of the Republic of Latvia. The data of the European Union have been obtained from 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. © Ministry of Economics of the Republic of Latvia, 2019 Reference mandatory in case of reprinting and quoting ISSN 2661-5118 3 OPENING STATEMENT We would like to deliver the new Report on the Economic the system of anticipating changes in the labour market to Development of Latvia prepared by the experts of the ensure more harmonised cooperation between all the Ministry of Economics for your evaluation. The report parties involved in anticipation of labour market changes assesses the economic situation, as well as forecasts the and introduction of necessary restructuring, thus enabling prospects of economic development. society to adapt to the expected changes in a more timely manner. In 2020, the Ministry of Economics in cooperation Although economic growth in Latvia is more moderate in with the State Employment Agency will continue work on the 2019, it is still one of the most rapid in the European Union creation of a platform for online reflection of labour market (EU). In the first 9 months of 2019, GDP has grown by forecasts to ensure the availability of labour market 2.5%The deceleration of growth rates was underpinned by forecasts to a wider range of stakeholders. both internal factors (the investments from EU funds have reached their maximum, developments in the financial To stimulate discussions and find the most effective sector, etc.) and external factors (review of global trade solutions to boost productivity, at the initiative of the relations, Brexit, slower growth in the EU). It may be Ministry of Economics, the government has designated the expected that the above-mentioned global factors will affect Scientific Institute LV PEAK of the University of Latvia as Latvia’s growth also in 2020, negatively impacting the export Latvian representative in the network of Productivity Boards capacity. Positive trends in domestic demand-oriented of European Union. The creation of Competitiveness and industries are also expected to continue. The Ministry of Sustainability Sub-Council of National Trilateral Cooperation Economics forecasts that in 2019 the economy will grow by Council (CSNTC) also fosters cooperation with the non- 2.5%. Similar growth will also be observed in 2020. governmental sector in promoting productivity. There were five CSNTC meetings in 2019. Productivity and Increased economic activity positively impacts the labour competitiveness of the Latvian economy, the Industrial market. Economic activity of the population has reached the Policy 2020+, the Smart Specialisation Strategy, and other highest level so far and is currently close to its potential; important matters were discussed. therefore, further improvements are possible only by reducing structural disparities – regional differences in the Latvia should be ready to embrace challenges related to the labour market, skills mismatches. changes brought by Brexit, the withdrawal of the United Kingdom from the block of the EU countries. In this context, To promote growth, the Ministry of Economics continues to the Ministry of Economics continues to provide informative strengthen the competitiveness of the economy by providing support to businesses and the population to help form a businesses with support to increase productivity and clear understanding of changes in practical life and business. international competitiveness. This is particularly important Cooperation with other EU countries will continue, in considering that a substantial increase in labour costs is particular, for the purposes of strengthening inevitable in conditions of an open labour market. competitiveness of the Baltic – Scandinavian region to The target growth scenario developed by specialists of the remove currently existing obstacles and barriers in the EU Ministry of Economics provides that the benefits of Latvia’ Single Market to foster opportunities of Latvian businesses; economic competitiveness are mainly based on technological to develop provision of their services across borders, incl. factors, improvement of production efficiency, and the digital environment. The organisation of similar innovation; however, to a lesser extent on cheap labour and activities, such as the creative workshop “Digital tools of the low resource prices. Single Market – opportunities for cross-border growth of SMEs”, on pressing issues in the EU Single Market and Human capital is particularly important in the promotion of matters of importance to businesses jointly organised by the competitiveness – reforms in the education system and Ministry of Economics and the European Commission on restructuring of the labour market to prepare and adapt to 26 April 2019 will continue. structural changes. Therefore, ongoing reforms in the education system should be pursued with the emphasis on Support programmes of the EU funds are successfully strengthening the quality of learning of exact and natural implemented, providing the opportunity to invest 4.4 billion sciences in basic education and secondary education and on euro in the development of Latvia. The most important the development of adult education. planned funding objectives of the EU funds include increasing the financial flow in research and development, To coordinate inter-sectoral cooperation required for facilitating the attraction of private investment, and planning, development, implementation, and monitoring of activating the cooperation of research institutions and labour market reforms or re-arrangement, thereby entrepreneurs. Significant investments are also planned for reducing the disproportion in the Latvian labour market, the the improvements of the information and communication Employment Board composed of three ministers (Minister of technology and transport infrastructure that directly affect Economics, Minister of Education and Science, and Minister economic productivity and are the basis for creating new, of Welfare) was established. In October 2019, the Board well-paid jobs and increasing the quality of life. agreed to undertake the role of a strategic coordinator of ECONOMIC DEVELOPMENT OF LATVIA | MINISTRY OF ECONOMICS | 2019 4 907.2 million euro for targeted investments into Doing Business 2020 study places Latvia on the 19th place modernisation and industrialisation of Latvia’s economy are among 190 countries. Also, Latvia holds the 6th place among available in activities of the Ministry of Economics in the EU Member States. 2014-2020 programming period, including for promotion of On 22 May 2019, the Cabinet of Ministers approved the energy efficiency – 377 million euro; the promotion of Action Plan for Improvement of the Business Environment competitiveness of small and medium-sized enterprises drafted by the Ministry of Economics. The vision of the Plan (SME) – 334.4 million euro; and the development of is to create an excellent business environment and to move innovation – 195.5 million euro. The following EU funds towards an innovative economic model. We have therefore activities will continue: Introduction of New Products in defined five priority action lines for the further improvement Production (support for acquisition of equipment), of the business environment, such as strengthening the rule Promotion of International Competitiveness (national stands, of law, developing customer-oriented public administration, including entering into external markets (participation in digitisation of public services and industry (Industry 4.0), exhibitions)), Training of the Employed, Competence openness of the business environment, and increasing the Centres, Business Incubators and Heat Insulation of competitiveness of the tax system. Apartment Buildings, provision of aid to economic operators also in the form of financial instruments

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