Caspian Energy (CE): Latvia’s economy has faced a range of challenges in the past year. Given the current global economic challenges, what are the main priorities for Latvia’s economic recovery and growth in the next 1-2 years?
Viktors Valainis, Minister for Economics of Latvia: Given the rapid geopolitical, economic, and technological shifts of recent years, the Ministry of Economy developed a new strategy for Latvia’s economic growth in May 2024 to enhance the standard of living and economic well-being of Latvian citizens at a faster pace.
The main goal is to double Latvia’s economy over the next ten years. This will be achieved by significantly boosting the productivity of Latvian companies, increasing it from 60% of the EU average in 2023 to the EU average by 2035. The use of innovation and the latest technologies, including artificial intelligence, along with the country’s excellence in the fields of the green economy, renewable energy, and bioeconomy, are highlighted as key elements for achieving rapid growth.
To achieve the government’s economic goal, it is essential to significantly improve financing access for entrepreneurs and actively attract investments to the national economy.
Targeted state investments in the national economy, coupled with EU funds, including the Recovery Fund, will significantly support the productivity, digitalization, energy efficiency, export capacity, and competitiveness of our entrepreneurs. This, in turn, will drive the growth of the Latvian economy and increase export volumes. At the same time, it requires that investments be made responsibly, so as to avoid increasing inflationary pressures.
CE: As part of the EU, Latvia has benefitted from various recovery funds. How is Latvia planning to utilize these resources to foster long-term economic resilience and growth?
Viktors Valainis: The last five years have been challenging for Latvia as a small economy to move from a transit economy to a high value-added economy in a short period of time. The events of recent years have taught us the importance of diversifying markets and expanding the circle of cooperation partners, enabling companies to better adapt to market changes and reduce the impact of external risks. We have also realized that we are strong in the development of niche products, which is ensured by the existing infrastructure, available materials and human capital.
To ensure the transition and industrial development, Latvia has allocated 1.6 billion euros from the Recovery and Resilience Mechanism and the European Union Structural Funds for economic recovery.
We see that it is necessary to think about the introduction of protection instruments at the European level, increasing support thresholds, promoting closer cooperation between large and small member states.
The Covid-19 pandemic had a significant impact on economic development globally and also in Latvia. GDP in Latvia shrank by 3.5% in 2020. The most significant reductions in 2020 were in the accommodation and food, beverage and leisure industries. The restrictions imposed on COVID-19 also had a significant impact on aviation, land transport and railway companies.
Since 2020, the government has implemented a strategy for mitigating the consequences of the Covid-19 crisis, aimed at stabilizing the economy, refocusing it in 2021-2022, and entering the growth phase starting in 2023.
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