Latvia’s living standards have increased towards the OECD average over the past 25 years, but structural challenges remain. Improving public finances and administrative capacity, enhancing health outcomes and accelerating the green transition would foster strong and sustainable growth, according to the latest OECD Economic Survey of Latvia.
The Survey projects GDP growth at 1.9% in 2026 and 2.2% in 2027, after growth of 2.1% in 2025. Average annual inflation is expected to decline from 3.8% in 2025 to 3.6% in 2026 and 3.2% in 2027.
“Latvia’s economy has shown resilience in a challenging international environment, supported by reforms that have improved conditions for investment and business growth,” OECD Secretary-General Mathias Cormann said, presenting the Survey in Riga alongside Latvia’s Minister for Economics Viktors Valainis. “To sustain convergence with higher-income OECD countries, the key priorities are strengthening public spending efficiency and public administration capacity, improving health outcomes, and accelerating the green transition. This would boost productivity, expand opportunities and raise living standards.”
The fiscal deficit has widened. To finance higher defence requirements, improve healthcare and reduce old-age poverty, Latvia can increase spending efficiency, reprioritise spending and optimise tax revenues, including through broadening the tax base. Shifting taxation from labour towards property and environmental taxes, while improving tax enforcement by making the filing of a personal income tax declaration and e-invoicing mandatory, would strengthen Latvia’s public finances.
Enhancing the capacity of the public administration is key to support fiscal sustainability and growth. Reducing overlaps across the public administration through thematic and cross-sectoral audits and strengthening spending reviews and policy impact evaluation would reduce fiscal costs and administrative burdens. This will also require better data sharing across the public administration and continued efforts to simplify regulations.
Despite improvements since the 2000s, life expectancy remains among the lowest across the OECD. Raising public health spending would help improve health outcomes for households who cannot afford private healthcare. This should be combined with improving health data coverage to raise spending efficiency and treatment quality. Continuing to increase excise taxes on alcohol and tobacco would help reduce high mortality rates due to preventable diseases.
Reducing greenhouse gas emissions remains a key challenge. Gradually phasing out fossil fuel subsidies and tax expenditures, alongside providing targeted support for vulnerable households, would help accelerate emissions reductions and raise public acceptance. Improving public transport quality requires implementing plans to establish a metropolitan transit authority in the Greater Riga area. Expanding training opportunities for workers who need to move jobs during the green transition would help preserve social cohesion.
The Economic Survey is launched on the occasion of Latvia’s 10th anniversary of joining the OECD. Since then, Latvia has made significant progress in strengthening institutions and advancing reforms.
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