Academic Centre
The Productivity Research Institute of the University of Latvia “UL Think tank LV PEAK” has prepared the first “Economic Barometer”, which includes an analysis of current Latvia’s macroeconomic data and practical recommendations for policy makers. The economic report summarizes the forecasts of Latvian and international institutions, as well as the consensus development forecasts of 21 macroeconomic experts .
The “Economic Barometer” differs significantly from other economic surveys because it publishes only the most important information in easy-to-understand language and in infographics. Therefore, it is equally useful for economists, politicians, entrepreneurs and every inhabitant of Latvia. It is planned that the “Economic Barometer” will be published twice a year, providing an opportunity to assess Latvia's economic situation in real time and to make data-based decisions, as well as to develop effective future development strategies. The first 10-page report is available here
“Latvia’s economy continues to recover from the crisis caused by the Covid-19 pandemic thanks to extensive government and the European Union (EU) support measures and increased exports. In the 1st quarter of 2022, the gross domestic product (GDP) has increased by 6.7% compared to the 1st quarter of 2021. However, the Russian invasion of Ukraine is having a negative effect on growth prospects. Inflationary pressures are rising, especially in energy and food prices. The number of employees and the employment rate are still significantly lower than in 2019. Labor shortages and a tight labor market are contributing to wage growth. Although not projected to be the case and not currently the most plausible scenario, the economy is in danger of stagnating as economic growth deteriorates further” emphasizes Prof. Gundars Bērziņš, the Chairman of the Productivity Board of Latvia and the Dean of the Faculty of Business, Management and Economics of the University of Latvia.
According to the developers of The “Economic Barometer” the risks of declining competitiveness remain very high, as the gap between productivity and labour costs has widened as a result of the pandemic crisis. In order to increase competitiveness, in addition to support measures for companies to shift from Russian market to others, as well as to significantly reduce bureaucracy, the shadow economy and corruption, the most important thing is to activate policies aimed at raising productivity.
“Latvia's weakest point is innovation, which requires investment in research and development, and in improving people's knowledge and skills. Financing by credit institutions for companies, which is exploited relatively little compared to the EU average and is one of the main reasons for Latvia's growth lagging behind Lithuania and Estonia over the last decade, should be encouraged. Strengthening energy security is also one of the key tasks. Targeted support for at-risk groups must be provided in the conditions of rising energy and food prices. Considering the geopolitical uncertainty, it is necessary to carry out a radical assessment of budget expenditures and effectively invest the resources of the Recovery and Resilience Facility to strengthen the competitiveness of the Latvia’s economy” points out Prof. Inna Šteinbuka, the director of the Productivity Research Institute of the University of Latvia “UL Think tank LV PEAK”.
