Latvia

Showing strong recent gains, Latvia falls into the upper-middle ranks (rank 16) in the area of economic policy. Its score on this measure has improved by 0.5 points since 2014.

The country had experienced a period of stable growth prior to the pandemic, generally exceeding the EU average. The outbreak of COVID-19 led to a significant decline in GDP, followed by a period of oscillation. Private consumption fell by 10% in 2020.

Latvia entered the pandemic with an unemployment rate of 6.4%, which then jumped to 8.6% in mid-2020, and remained above 8% in early 2021. The monthly minimum wage was increased to €500 in early 2021. The shrinking working-age population remains a concern, with a very high share of emigrants being highly skilled.

Pandemic-era support and stimulus spending led to a government deficit of 4.5% of GDP in 2020, rising to 9.3% in 2021. Total debt remains moderate, reaching 47.3% of GDP in 2020. The country’s corporate tax system is highly competitive. The country has made significant improvements in recent years with regard to cracking down on money laundering.

With a mixed safety-net record, Latvia scores relatively poorly overall (rank 32) with regard to social policies. Its score on this measure has improved by 0.1 point relative to 2014.

Education reform has been a focus in recent years, with new curricula gradually being introduced. Spending on the sector is low, but increasing. The number of institutions and study programs in the higher-education sector remains unsustainably high. A small guaranteed minimum income has been increased following court rulings.

The healthcare sector is underfunded. Only about 60% of costs are covered by public schemes. Parental-leave benefits are generous, and the employment rate among women is above the EU average. Access to kindergartens is difficult, with families often waiting years for a place.

Pension benefits are low, with retiree poverty a serious problem. Integration policies for migrants and undeveloped. Automatic citizenship has been granted to children of the long-term residents who were not naturalized after independence from the Soviet Union. Crime rates are low.

With generally good environmental-performance outcomes, Latvia scores well overall (rank 11) with regard to environmental policies. Its score on this measure has improved by 0.1 point relative to 2014.

The country’s climate policy is driven primarily by its EU obligations. It performs well in the area of renewable energy, but energy use figures overall are concerning. Per capita emissions are increasing.

Environmental ambitions are rising after a series of recent reforms. Municipal waste management is improving, a new law reduces the use of plastic products, and a new packaging system aimed at reducing waste and fostering a circular economy is being introduced.

Protection of forests is well organized, with strong management plans for the country’s forests. The country complies with major international agreements, and has bilateral environmental cooperation agreements with many EU and regional states.

With generally fair electoral procedures, Latvia scores well overall (rank 12) with regard to democracy quality. Its score on this measure has declined by 0.1 point relative to 2014.

Public funding for parties has been increased, with private donations strictly limited. Companies cannot contribute. Campaign spending is capped, with infringements subject to penalty. A new law allowing referenda at the local level has been approved but not implemented. A new governance system for the public media renders it less susceptible to political influence.

Civil rights and political liberties are generally protected, but some concerns over prison conditions have emerged. The parliament has not ratified the Istanbul Convention, hindering the state’s ability to address domestic violence. Views on same-sex partnerships are intensely polarized, and discrimination on the basis of sexual orientation is poorly regulated.

Courts are independent but overloaded, with access regulated through the imposition of fees and security deposits. International groups have highlighted the uncertainty of bureaucratic decisions as a problem. The state has successfully reduced the incidence of corruption and money laundering in recent years.

With significant strategic capability, Latvia receives a high overall ranking (rank 8) in the area of executive capacity. Its score on this measure has declined by 0.1 point relative to its 2014 level.

A recently established government planning unit has expanded strategic capacities and helps to review line-ministry proposals. This is now being merged into the Chancellery. Coalition parties have broad influence over the ministries they control, weakening the prime minister’s power. An informal “collaboration council” meets regularly to coordinate the work of the governing coalition.

A recently introduced online portal for legislation has made the drafting process more transparent, and enhanced collaboration. RIAs are required for all draft proposals. The online portal has helped standardize the process. Public consultation is frequent, but its impact is often limited. Communication has been streamlined under the Chancellery’s new communication coordination department.

Domestic adaptability to EU norms has proven substantial. Municipalities have been consolidated in an attempt to make them economically stronger. Efforts to improve regulatory enforcement, particularly within the banking sector, have improved.

With notable oversight weaknesses, Latvia falls into the bottom ranks (rank 37) with regard to executive accountability. Its score on this measure has improved by 0.5 points relative to its 2014 level.

Parliamentarians’ resources are very limited, despite adequate formal oversight powers. A parliamentary research unit was recently created. The audit office primarily focuses on the executive and local governments, while the extra-parliamentary ombuds office has played an influential role in raising guaranteed minimum income levels.

Citizens are slow to engage with the political process, with few belonging to political parties. Media quality has improved in recent years, with increasing quantities of high-quality content available. The proliferation of pro-Russian narratives in the media and online has become a challenge.

Political party members have little input on most organizational decisions. Economic associations are sophisticated, influencing policy through the Tripartite Council. Noneconomic NGOs have joined together to seek a greater voice in the government’s budget-planning process.