Latvia: country overview

Latvia's economy experienced GDP growth of more than 10% per year during 2006-07 but entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the softening world economy.

Year of EU entry: 2004

Member of Schengen area:Yes

Political system: Republic

Capital city: Riga

Total area: 65 000 km²

Population: 2.2 million

Currency: lats

Listen to the official EU language:  Latvian

Country overview

Latvia regained independence from the Soviet Union in 1991. Situated on the Baltic coast, Latvia is a low-lying country with large forests that supply timber for construction and paper industries. The environment is rich in wildlife. Latvia also produces consumer goods, textiles and machine tools. The country attracts tourists from all over Europe.

Ethnically, the population is 59% Latvian and 29% Russian, and more than a third live in the capital Riga. Founded in 1201, Riga is the largest city in the three Baltic states with a population of 730 000. Its Freedom Statue is one of the highest monuments in Europe, at 43 metres.

The 100-seat unicameral Latvian Parliament, the Saeima , is elected by direct, popular vote every four years. The president is elected by the Parliament, also every four years.

Economy overview

Latvia is a small, open economy with exports contributing significantly to its GDP. Due to its geographical location, transit services are highly-developed, along with timber and wood-processing, agriculture and food products, and manufacturing of machinery and electronic devices. Export growth contributed to the economic recovery, however the bulk of the country's economic activity is in the services sector. Corruption continues to be an impediment to attracting foreign direct investment and Latvia''s low birth rate and decreasing population are major challenges to its long-term economic vitality. Latvia''s economy experienced GDP growth of more than 10% per year during 2006-07, but entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the softening world economy. Triggered by the collapse of the second largest bank, GDP plunged 18% in 2009. A rebound in the export sector contributed to the economy''s first real quarterly GDP growth in over two years (2.9%) in the third quarter of 2010. The IMF, EU, and other international donors provided substantial financial assistance to Latvia as part of an agreement to defend the currency''s peg to the euro in exchange for the government''s commitment to stringent austerity measures. The IMF/EU program successfully concluded in December 2011. The government of Prime Minister Valdis Dombrovskis reduced the fiscal deficit to 7.7% of GDP in 2010, and to 4% of GDP in 2011. Riga plans to reduce the budget deficit to less than 3% of GDP in 2012 in order to meet its goal of joining the euro zone in 2014. The majority of companies, banks, and real estate have been privatized, although the state still holds sizable stakes in a few large enterprises, including 99.8% ownership of the Latvian national airline. Latvia officially joined the World Trade Organization in February, 1999 and the EU in May 2004.

Useful links

The Commission's Representation in Latvia

European Parliament office in Latvia

Latvian Government

Tourist information

Source: Your Europe