OECD Economic Survey of Latvia 2026
Latvia’s economy has been resilient and is continuing to grow at a steady pace.
GDP growth is expected to be 1.9% in 2026 and 2.2% in 2027.
Yet, structural challenges continue to weigh on long-term growth.
To improve firms’ access to finance and foster investment and innovation, it is key to strengthen bank competition and deepen capital markets.
High defence requirements, improvements in health care and reductions in old-age poverty will require strengthening public finances.
To fund future spending needs:
- Strengthen performance and multi-annual budgeting
- Optimise revenues from income, property and environmental taxes
- Enhance tax enforcement, including by making the filing of a personal income tax declaration and the use of e-invoicing mandatory
Despite recent progress, the perceived effectiveness of the public administration remains low. Overlapping functions and weak coordination across the public administration reduce government efficiency and increase administrative burdens.
To raise spending efficiency and reduce administrative burdens:
- Conduct thematic and cross-sectoral functional audits of the central government with a view to consolidate public bodies and contain public-sector staffing costs
- Simplify regulations and administrative procedures for firms
- Improve data sharing and policy impact evaluation across the public administration
Limited capacity in the public healthcare system restricts access for households who cannot afford private healthcare.
To improve health outcomes:
- Increase public spending for healthcare and the coverage of services through higher contribution rates or general taxation
- Raise spending efficiency by expanding coverage of patient records in the e-health system
- Promote healthier lifestyles through higher excise tax rates on alcohol, tobacco and sweetened beverages
Greenhouse gas emissions reductions have slowed since 2005.
To reinvigorate the green transition, strengthening carbon pricing should be combined with supporting vulnerable households and workers who need to move jobs and adapt to changing skills requirements.
To strengthen climate change mitigation policies:
- Enhance carbon pricing by gradually phasing out tax expenditures and subsidies for fossil fuels
- Further improve the grid infrastructure to accelerate the expansion of renewable energy supply
- Implement plans to establish a metropolitan transit authority in the Greater Riga area to improve the quality of public transport
- Initiate rewetting of drained peatlands where feasible
Explore the analysis and policy recommendations in the OECD Economic Survey of Latvia 2026.