Economics and business
In 2011, Latvia's economy recovered from the deepest
recession in the EU, and with the help of a three-year
international loan program, the state budget was on track.
Government debt, which has risen significantly in recent
years, represented around 45 percent of GDP in 2010.
When Latvia joined the EU in 2004, it was the Union's
poorest member with a per capita GDP of 46 percent of the EU
average. After entry, the economy grew record-breaking with
GDP growth of about 12 percent in 2006 and just over 10
percent in 2007. At the same time, banks' lending increased
without significant restrictions, property prices went up
just over 300 percent in three years and, after extensive
labor migration, wages rose rapidly - this without
productivity following. after. As a result, Latvia's
competitiveness was eroded, at the same time as the economy
was overheating. Consumption and investment fell through
hard credit, and GDP fell by a quarter in 2008-10. In the
wake of the international financial crisis followed the
banking crisis and the acute budget crisis, which forced
Latvia to borrow from the IMF, EU and Sweden, among others.
According to
COUNTRYAAH, Soviet central planning gave Latvia's business sector
heavy sectors that depended on raw materials and labor from
the interior of the Soviet Union. The shift to market
economics in the 1990s knocked out many old industries that
were replaced by lighter manufacturing. The restructuring of
the economy, with extensive privatizations, has demanded
great sacrifices and at times caused high unemployment.
However, the strategic transport and transit sector has
maintained its importance.
From the Soviet era and the 1990s privatizations, there
is a legacy of corruption, which impedes business. The gray
economy, with widespread tax fraud, was estimated at 38 per
cent of GDP in 2010. Trade has been reoriented to the west,
and the inflow of foreign direct investment has been
significant, with a corporate tax of 15 percent. Sweden is a
leading investor, primarily in the banking and telecom
sectors. Productivity growth in the industry was good for a
long time but has slowed. It is a problem for the business
community that very well-educated professionals emigrated
during the crisis years. In 2014, the country changed
currency from lats to euros.
For information on GDP and other business statistics, see
Landsfakta.
Agriculture
Although the natural conditions for cultivation are
relatively poor, agriculture is an important part of
Latvia's business sector. About 1/3 of the land area is
usable land. Agriculture, together with fishing and
forestry, employs about 1/10 of the labor force.
Agriculture was collectivized in 1949–50 with devastating
results for production. With independence, agriculture was
re-privatized, and the transformation from the Soviet
colonies became dramatic. In 1989, there were approximately
600 agricultural units with an average of 3,800 ha, which
were divided into a few hundred thousand small farms of just
under 7 ha on average. Agricultural land and production
decreased sharply, and the nature of agriculture was
transformed. Animal production (especially pork, beef and
milk), which accounted for about 3/4 of the total
agricultural production value at the end of the Soviet era,
has now declined sharply. Animal husbandry accounts for just
under half of total agricultural production value, while
arable farming accounts for just over half. Crops grown are
mainly cereals (mostly wheat and barley), potatoes, sugar
beets, vegetables and fodder plants.
About 4/5 of 113,000 economically active farms were small
family farms in 2008. Half of the 35,000 dairy farms had
only one cow each.
Forestry
About half of Latvia's area was covered by forest in
2010, a significant increase since 1990. Coniferous trees
such as pine and spruce dominate, but there is also a lot of
glass birch and spring birch as well as some aspen, gray eel
and club bale.
In 2008, 9 million m 3 were felled. Most are
sold as timber and pulpwood, and the remainder is mainly
used in furniture manufacturing, for plywood, firewood and
the carpentry industry. The wood and wood processing
industry is Latvia's most important export sector. Almost
half of the forest is privately owned and the rest is state
owned or has other forms of ownership. More than a tenth of
all forest is protected from harvesting, among other things.
as national parks.
Fishing
The conditions for fishing are comparable to other Baltic
Sea countries, and Latvia has good ports in Riga, Ventspils
and Liepāja. Environmental degradation, especially in the
Gulf of Riga, and fishing has greatly reduced coastal
fishing, although it is still of great importance to locals.
Other Baltic sea fishing has also declined, and in 2010 55
per cent of the catch came from high sea fishing in the
North Atlantic and off the west coast of Africa. The total
catch in 2010 amounted to 164,500 tonnes, which corresponds
to about a quarter of the catch at the end of the 1980s.
Sparrow and herring dominate the catch in the Baltic Sea,
while thistle mackerel and species in the genus
Sardinellais most important in high sea fishing. In
Latvia, inshore fishing is of limited scope and mainly for
house needs.
Raw material resources and energy supply
Latvia is very poor in industrially useful raw materials
and minerals. Most of the need must be met through imports
or met by recycling. Commercially degradable deposits of
dolomite, limestone and plaster as well as of sand and
gravel are found. In terms of volume, crushing gravel,
natural gravel and sand make up the bulk of production.
Steel production takes place in Liepaja.
Small amounts of oil and natural gas have been found in
western Latvia, but otherwise the country is poor on energy
resources. Traditionally, firewood and peat have served as
the main sources of energy for households. Wood still
accounts for a quarter of primary energy consumption in
Latvia, while imported oil and gas account for almost a
third of each.
When it comes to electricity, the expansion of water
energy in Daugava accounts for almost half of the country's
needs, while one-third is generated in power plants with
fossil fuels and biofuels. Latvia also imports electricity.
The industry that was built up during the Soviet era had
high energy intensity, and gas and oil pipelines were drawn
from the interior of the Soviet Union to Latvia. In a huge
gas warehouse below ground level in central Latvia, two
years supply of gas is provided for the country. However,
Latvia is striving to reduce its dependence on Russian
energy and hopes for future electricity imports from
Lithuania and via cable from Sweden to the Baltic countries.
The restructuring of the business sector that has taken
place since 1990 has reduced the demand for energy from
industry, but in return household demand has increased.
Industry
The Latvian industry mainly produces food, forest and
wood products, metal products, textiles and clothing,
electronics and electrical engineering. Forest and timber
products are also the largest export products. Relatively
low industrial wages have long given Latvia a competitive
advantage, and production volumes grew steadily between 2001
and 2007, when the economy overheated and wages increased by
over 30 percent in one year. In connection with the global
financial crisis of 2008–09, Latvia's industrial output
fell, but with a significantly lower wage position, a
recovery began in 2010.
The structure of the industry is partly a legacy of the
Soviet era. At that time, an extensive heavy industry was
created in Latvia with the manufacture of ships, rail cars,
machines and minibuses. Two-thirds of Soviet telephones were
produced in the Riga factory VEF, with a maximum of 20,000
workers.
After a relatively rapid industrial expansion in Latvia
in 1950–80, growth stagnated. The relatively high level of
education of the population, combined with the lack of
locally available raw materials, to some extent guided
production towards the engineering and processing
industries.
Not only raw materials but largely also labor were
sourced from the interior of the Soviet Union, and the goods
had been exported with government subsidies. Therefore, when
Latvia was liberated from the Soviet Union, industrial
production and employment declined dramatically. Following
privatizations in the 1990s and the transition from heavy to
light production, the manufacturing industry has again
gained importance. Industrial exports, which used to go
east, now go mainly to the EU market. For example, the
electronic and electrotechnical industry, which was
previously largely defense-related, has been transformed
into high-tech manufacturing that is internationally
competitive
The consumer goods sector was already largely under local
control in the past and has performed relatively well,
although import competition is noticeable. The manufacturing
industry is to a large extent responsible for semi-finished
and labor-intensive elements in foreign companies'
processing chains. This applies, for example, to the textile
and clothing industry, but also to the wood and metal
products industry. In addition to food, retail, service,
transport and telecommunications, these sectors have
attracted the most foreign investment. The inertia of
privatization and modernization has long slowed down
investors, but among other things, Scandinavian companies
have in recent years established themselves in, for example,
Liepāja, one of four economic free zones with tax rebates.
However, Riga dominates industrial production.
Foreign trade
More than 70 percent of Latvia's exports go to other EU
countries. The most important markets are Lithuania,
Estonia, the Russian Federation, Germany and Sweden (mainly
wood). Imports come mostly from Lithuania, the Russian
Federation, Germany, Poland and Estonia. This means that
former Soviet republics are important trading partners even
today. Wood and wood products make up about one fifth of
Latvia's exports. Other important export goods are metal
products, machinery and machinery, electrical equipment,
food, chemicals and pharmaceuticals. Imports mainly consist
of machinery and mechanical equipment, electrical equipment,
mineral products and metal products. Latvia has long had a
trade deficit. In 2007, imports were almost twice as high as
exports, but during the following financial crisis, imports
fell sharply.
Tourism and gastronomy
Latvia was visited in 2012 by just over 1.4 million
tourists. The main ones come from the Russian Federation,
Lithuania, Germany and Finland. The country's small format
means that most destinations can be reached through day
trips from Riga. Rigathe old town houses three large brick
churches, of which the cathedral, with all building styles
represented from Romanesque to Baroque style, is the most
striking. In the adjacent monastery buildings is Riga's
historical museum, with interesting objects from the Swedish
era. In the old town there are also strange profane
buildings, including the castle, today a partly historical
museum. Erik Dahlbergh's old fortification has become parks,
but the moat remains. In addition, the settlement dates from
Riga's economic heyday in the 1880s-1910s, of which the Art
Nouveau architecture is famous (including Alberta iela
street). Riga's culture has a strong German influence; the
specific Latvian is found in the popular culture, in the
wooden architecture of the farmhouses and rural churches,
which can be studied at the open-air museum northeast of the
city.
By the sea near Riga lies the resort of Jūrmala, where
the Riga Bay semi-circle of finest sandy beach attracts a
growing bathing tourism. In Jūrmala there is also an outdoor
scene for major music events. In this context, mention
should be made of the large song festivals, which, every few
years, are held in Riga at the end of June and the beginning
of July. A few hours drive from Riga to the northeast,
Sigulda lies with the ruins of three medieval towns and
stately nature in the deep cut valley of the Gauja River.
The ruins of the German Order's central plant in Cēsis from
the late Middle Ages and the 16th century are impressive,
and nearby is a reconstructed Iron Age village.
The more sparsely populated eastern Latvia (Latgale)
offers a varied, hilly and forest and sea-rich terrain with
fine forest walks, winter sports and the Catholic pilgrimage
site Aglona with a large Baroque basilica. A unique
attraction in southern Latvia is the Kurund Dukes Castle
Rundāle. The German ruins of the German Order, the castles
and mansions of the Balth German gentlemen, as well as
churches with interesting furnishings can be found
throughout most of the country, although faring poorly
during the Soviet era. Particularly interesting is a visit
to Latvia in connection with the most important annual
holiday, midsummer. Then great hospitality develops, and you
go from farm to farm to drink home-brewed beer (or nowadays
more and more brewery beer), maybe other national drinks
like vodka and the liqueur Rigabalsam. As the sun goes down,
the entire midsummer fires light up,
Agriculture has always played a major role in Latvia's
economy and culture, and the "peasant" trait is evident in
the food industry. Rye, wheat and barley as well as root
vegetables and dairy products characterize the menus in the
form of bread, soups with cabbage and root vegetables,
potato dishes and cheeses and yogurt products. There is also
a preference for soured vegetables. Soup with barley grain
and dried mushrooms is a specialty, as is pea soup with
pork, charcoal soup, sourdough bread with sour cream as a
topping, smoked herring and not least pies. These can be
filled with smoked fish, minced meat, eggs or cabbage. Fruit
compote is usually the end of a meal, if you do not choose
the special Alexander cake, filled with currant jam.
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