Latvia’s economy: major changes this year
Despite its small size and lack of large energy reserves, Latvia’s economy is growing steadily. Even the trials of last year have not diminished its position, and the country’s GDP has shown the best results among the EU member states. The main driving force of the economy is the manufacturing industry. It allowed surviving the difficult period of the pandemic and to recover production volumes in a short time. According to statistics, during the first two quarters of 2020, the figures in the manufacturing industry dropped to almost zero, but after the lifting of quarantine restrictions, processes began to actively resume. Thanks to this, production already began to grow in the fall, and it was quite impressive, as it was for a crisis year. According to statistics, in December 2020 the volume of the industry showed an increase of 4.3% compared to 2019.
Latvia’s GDP in 2020 decreased by 4.7%, and by the end of this year analysts forecast growth of 5.1%. In 2022 and 2023 this indicator is expected to increase by 3.1%. Inflation in the last period was 0.1%, and in 2021 is expected to be 1.4%. It should be noted that due to the unstable situation in 2020, the forecasts were revised and adjusted several times depending on the changing situation on the domestic market and the world market.
According to this year’s budget, the consolidated budget expenditures are set at 10.76 billion euros. As for the main budget, it will amount to 6.68 billion euros and expenditures to 7.8 billion euros. It is worth noting that the budget for 2021 was 328 million euros lower than in 2020, while expenditure rose by 744 million euros. The budget deficit was planned at 3.9 percent of the country’s GDP.
Since the beginning of the year the minimum wage in Latvia increased to 500 euros, until January 2021 it was 430 euros.From this summer, the country’s authorities introduced new rules for groups of people who operate under alternative tax regimes. Now they are obliged to pay special social contributions. The changes did not affect pensioners and people with disabilities. In addition, the rate of state social insurance has been reduced since this year.
Social security benefits have changed. Now people who have reached retirement age, but do not have a full pension, will receive assistance in the amount of 190 euros. The same rate applies to people with disabilities.
Experts predict that Latvia’s economy will continue to grow in the coming years. It showed its stability during the pandemic, which makes it possible to draw optimistic conclusions for the short term.