Latvia's economy has weathered recent shocks and is regaining growth momentum. In 2023, geopolitical uncertainty, high prices and rising interest rates led to a 0.9% GDP contraction, with declines in private consumption, exports and imports offset by rises in government spending and investment. Inflation eased in 2024, but the economy contracted in H1 before expanding in H2, resulting in flat annual GDP. Private consumption and exports grew modestly; government consumption and investment fell.
In Latvia 99.8% of all individual merchants and commercial companies are SMEs and 94.1% of SMEs were micro-sized. In the Latvian ‘non-financial business economy’, SMEs account for 69.8% of value-added and 76.2% of employment, significantly higher than the respective EU averages of 53.1% and 65%.
In 2024, the interest rate for SMEs stood at 7.46%, approximately 20% higher than in 2023, when the rate was 6.21%. In contrast, the interest rate for large firms in 2024 was 6.05%, reflecting a 3.6% increase compared to 2023, when it stood at 5.84%. The interest rate spread in 2024 was 1.41 percentage points, compared to 0.37 percentage points in 2023. Consequently, the spread widened by 281.08%. This increase in interest rates for SMEs is primarily attributable to the active participation in lending by medium- and large-sized domestic banks, which typically apply higher rates than their major international counterparts. Overall, the situation should be regarded positively, as the involvement of these mid-tier and smaller banks has significantly enhanced access to financing for small and medium-sized enterprises, thereby supporting their growth and competitiveness.
The number of SME insolvencies has fallen sharply since 2009 – from 2 202 cases to 242 in 2024, showing improved financial discipline and effective state support.
The establishment of Altum in 2014 as a national development finance institution has significantly enhanced SME access to a comprehensive range of financial instruments, including loans, guarantees, and equity, thereby addressing market failures through the effective utilisation of EU Structural Funds. Key initiatives include:
Altum’s credit guarantee programme, operational since 2016 and backed by over 80 million EUR in EU funding, has issued 440 guarantees worth 24.7 million EUR by October 2025, enabling SMEs with limited collateral to secure up to 80% of loan principal.
Energy efficiency loans with capital rebate for businesses: Under the Recovery and Resilience Facility, 53 million EUR has been deployed by Q3 2025 to 487 firms, facilitating energy upgrades and renewable adoption projected to cut CO₂ emissions by 14 527 tonnes annually.
SME Growth Loans: Continued across EU programming periods, SME growth loans have approved 54.1 million EUR for 209 projects by September 2023, with an additional 12.62 million EUR contracted for 37 firms in 2021–2027, leveraging 6.8 million EUR in private funds.
Start-up and microloans, loans for micro companies: The start-up loan programme, active since 2016, has disbursed 18.3 million EUR across 750 loans and 3.1 million EUR in 227 microloans by September 2023; the 2021–2027 measure has supported 515 firms with 24.78 million EUR, including 299 new enterprises.
In line with its 2023 initiative to create and fund the Baltic SME IPO Fund, the Latvian government announced on 29 September 2025 that ALTUM, partnering with Lithuania’s ILTE, has launched the Baltic Capital Markets Acceleration Fund “1 Asset Management” – the region’s first such initiative. Valued at over 50 million EUR, the fund will support Baltic firms preparing for IPOs, accelerate local capital market growth, and benefit from private investments by “1 Asset Management” and “Baltic Partners”.