The Latvian economy has been resilient to recent shocks, but structural challenges remain. To finance high defence spending, improvements in health care and reductions in old-age poverty while containing the fiscal deficit, it is key to raise spending efficiency, reallocate spending and raise tax revenue, including by broadening the tax base and strengthening tax enforcement. As labour taxes are high, the tax burden should be shifted towards other income, property, and environmental taxes. Improving access to finance and supporting business dynamism by reducing the administrative burden, continuing to reduce informality and strengthening competition would raise productivity growth. Reducing the administrative burden and raising spending efficiency will require further simplifying and digitalising administrative procedures and improving data sharing and policy impact evaluation across the public administration. Accelerating the green transition will require strengthening carbon pricing and facilitating the expansion of renewable energy supply, while supporting vulnerable households and helping workers adapt to changing skill requirements. To improve health outcomes, it is key to strengthen the financing and efficiency of the public health care system and promote healthier lifestyles.

SPECIAL FEATURES: STRENGTHENING CLIMATE CHANGE MITIGATION AND ADAPATATION POLICIES, IMPROVING HEALTH OUTCOMES, IMPROVING ADMINISTRATION CAPACITY

Further reading

• Press release  l Paziņojums presei

Housing affordability and quality are pressing challenges in Latvia. While Latvian households spend, on average, less on housing than their OECD peers, many are stuck in poor quality housing. Residential investment has stagnated since 2008, and the housing stock has been insufficiently maintained. In the face of these challenges, public support for housing is limited and an underdeveloped rental market further limits affordable housing alternatives. This report provides an in-depth assessment of housing affordability challenges and identifies policy actions to address them. The report is the result of the work of an interdisciplinary team bringing together the Economics Department and the Directorate for Employment, Labour and Social Affairs. The report contributes to the cross-cutting OECD Horizontal Project on Housing. 

The Latvian government established the Housing Affordability Fund in mid-2022, a long-term self-sustaining financing model to channel investment into affordable housing. The fund is now being scaled up to ensure lasting impact on the Latvian housing market. This report identifies options for institutional arrangements, funding and financing opportunities, and operational tools to achieve this aim. It draws on the rich and diverse experiences of four peer countries in establishing and operating revolving fund schemes for affordable housing (Austria, Denmark, the Netherlands and Slovenia), and also reflects findings from engagement with a range of stakeholders in the Latvian housing sector.