Analytics, Economics, EU – Baltic States, Latvia

International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 20:07

European Commission urges Latvia to change growth model

BC, Riga , 08.03.2018.Print version
Latvia will have to change its economic growth model because the times of easy success is over, the European Commission says in its latest Country Report Latvia 2018, reports LETA.

The European Commission acknowledges a steady growth of productivity in Latvia after the crisis but notes that the recovery phase is already over.

Since 2010, productivity in Latvia has been growing at an average rate of 2.4% a year, which is one of the highest figures in the European Union (EU). Yet it has dropped by more than a half in comparison with the fast economic catch-up process before the crisis. A structurally lower investment rate suggests that the phase of easy success is over and Latvia’s growth model has be changed, focusing on getting to the top of the global value chain.

At the same time, the European Commission notes that weak innovation indicators, mediocre education results and outflow of talent due to emigration causes concerns about the Latvian economy’s ability to increase its share in knowledge-based industries.

The European Commission describes Latvia’s business climate as generally favorable despite persisting problems in the judiciary and public procurement.

The European Commission also points to rapidly growing labor costs which causes certain concerns about the competitiveness of Latvian prices. Wage growth, which is driven primarily by increasingly severe labor shortages, might help curb emigration. Although for the time being the risks are minimal, it is essential to take political measures to increase the supply of workforce, the European Commission says.






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