The Ministry of Economics’ main priority in 2023 is the country’s economic security

LATVIA – Ministry of Economy

According to the Ministry of Economics, the economic situation in the world as well as in Latvia this year has been significantly affected by the Russian invasion of Ukraine. Because of the war, global economic activity is slowing down, supply chains are disrupted, and inflation is higher than it has been in decades. 

The Ministry of Economics' main priority in 2023 is the country's economic security

All this is happening at a time when the world is just beginning to recover from the effects of the Covid-19 pandemic. In 2022, economic growth in Latvia due to geopolitical factors will decrease by at least 3 percentage points compared to forecasts before the Russian invasion of Ukraine. Nevertheless, economic growth remains positive this year and could be 1-2% per annum.

«Given the rapidly deteriorating geopolitical situation, the Ministry of Economy has developed several new support instruments to stabilise the economy as a whole and support entrepreneurs. Support for entrepreneurs affected by the war in Ukraine is provided both in the form of grants and financial instruments. In order to partially compensate for the rise in energy prices during this heating season, extensive support is provided to households and entrepreneurs, and local governments have created a more favourable calculation of housing allowance,» emphasises Ilze Indriksone, the Minister of Economics.

The Economic Development Report 2022 prepared by the Ministry of Economics specialists contains information on the most important economic and social indicators of Latvia, the development of industry and the external economic environment, the prospects for economic development, the government’s economic policy and the main tools for its implementation.

Greater uncertainty affects both citizens’ consumption and the future plans of companies and foreign trade. The most challenging economic situation is expected at the end of 2022 and will continue in the first half of 2023; growth may accelerate in mid-2023, but overall growth in 2023 is expected to be much more moderate than in 2022.

Further development of the economy in the medium term will depend on the external environment and the progress of reforms. The biggest risk for growth in Latvia is related to the development of the global economy, especially the Covid-19 halt and the geopolitical situation. Equally important will be the future development of the European Union’s common economic space. Latvia’s economic advantages in the medium term will mainly be based on achieved macroeconomic stability, which has improved Latvia’s credit rating, as well as on effectiveness of planned EU support programme and improvement of business environment.

The competitive advantages of the Latvian economy are mainly related to technological factors, improved production efficiency and innovation, and to a lesser extent to cheap labour and low resource prices. In 2023, we forecast minimal, but positive GDP growth with inflation rate below 10%. In the medium-term Latvia may grow at the rate of 4-5% per annum. If the war in Ukraine and Covid-19 pandemic continues, the pace of economic recovery may slow down.

Given the worsening geopolitical situation, the labour market situation is expected to remain tentative in early 2023. Resilience of Latvian economy to external shocks has significantly strengthened in previous years, especially in the financial sector, therefore direct impact of sanctions and export market contraction on Latvian labour market will be limited.

The labour market will continue to be supported by rehabilitation of industries from the effects of the Covid-19 pandemic and construction of public infrastructure, as well as other types of public investments and measures to support economic recovery.

Latvia’s economic development report is prepared by experts from the Ministry of Economics once a year – in December. The report describes the policies pursued by the Ministry in the areas of business environment, innovation and new technologies, industrial investments and export promotion, as well as energy, construction, housing policy, tourism, competition policy, consumer protection, etc.

Latvia’s economic development report is published on the website of the Ministry of Economics: www.em.gov.lv

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