In Latvia we focus on:
Supporting investments in energy security and energy efficiency. The EBRD is focussing in particular on promoting and financing new renewable energy generation capacity and improving energy efficiency.
Strengthening the financial sector. The EBRD has played an important role in restructuring and turning around the systemically important Parex bank. Further engagement in the financial institutions sector will focus on strengthening financial sector stability as well as supporting credit recovery, developing private equity and mezzanine capital financing, particularly to SMEs.
Improving the competitiveness of the export sector. The EBRD is prioritising support for export--oriented firms as well as for cross-border investments by Latvian companies elsewhere in the Baltics or CIS region. The Bank is paying particular attention to supporting investments designed to improve energy efficiency in order to further boost competitiveness.
Policy dialogue. We are conducting policy dialogue with the Latvian authorities with regard to ongoing reforms in the financial sector in close cooperation with the European Commission. The EBRD is continuing to support the improvement of corporate governance in Latvia, particularly in unlisted and state-owned enterprises. In the public sector, policy dialogue is focussed on improving procurement and increasing transparency. Efforts continue to encourage the development of PPPs and supporting legislation, in particular with regard to roads and other infrastructure.
As well as being a country where the EBRD works, Latvia is also an EBRD donor. Latvia takes an active part in the Eastern Europe Energy Efficiency and Environment Partnership Fund and has contributed €85,000 for activities in Ukraine.
The EBRD’s latest strategy for Latvia was adopted on 15 September 2021.
EBRD forecast for Latvia’s real GDP growth in 2023 0.0%
EBRD forecast for Latvia’s real GDP growth in 2024 2.5%
The Latvian economy expanded by 2.8 per cent in 2022, mostly fuelled by robust levels of household and government expenditures. On the flip side, destocking of inventories and a negative trade balance both weighed on GDP performance last year. The HICP inflation rate slowed from a peak of 22 per cent in September 2022 to 17.2 per cent year-on-year in March 2023, but it remains the second highest in the EU. As a result, households’ disposable incomes are not expected to recover until next year, though labour shortages and minimum wage hikes will likely contribute to nominal wage growth in 2023 and 2024.
Higher financing costs and tighter bank lending have negatively impacted investment, but the prospects of accelerated absorption of EU funds later this year and next are likely to boost investment, particularly through the RRF initiative. Output is projected to remain flat (zero growth) in 2023, with GDP rising by 2.5 per cent in 2024.