Latvia's economy is gradually returning to growth, but the greatest risk remains the geopolitical situation. This is stated in the "Economic Barometer" study published on January 6.
The study also shows that young people generally have a positive view of the development of Latvia's economy.
"Economic Barometer" is published twice a year - in June and December - based on statistical data and expert assessments. Overall, the study presents a cautiously optimistic picture. As noted by the director of the analytical center at the University of Latvia, Professor Inna Steinbuka, the recovery of the Latvian economy is still significantly influenced by geopolitical tensions and crises from previous years - the pandemic, the war in Ukraine, and shocks in the energy sector. However, both in 2025 and this year, experts expect a return to growth. It is forecasted that the gross domestic product (GDP) will grow by 2.2% this year, which is slightly better than the projected 2% in the summer. Positive trends are also visible in the coming year.
"Firstly, there are the European Union funds, there are many of them, and in the past and this year their volume has exceeded a billion, which we hope to not only utilize but also invest very wisely. The second factor is certain positive trends in lending, because we have long criticized our private banks for not providing loans or for providing them on very unfavorable terms; in short, this sector has lagged behind. Now positive trends are emerging, and I hope they will continue," said Steinbuka.
Moreover, external demand, despite concerns about American tariffs, remains relatively stable and supports exports. The unemployment rate in Latvia is still relatively high, but a slight decrease is forecasted this year - from 6.8% last year to 6.5% this year. At the same time, experts expect that the labor shortage will persist. Wages continue to rise, but their growth still outpaces labor productivity growth, which creates additional pressure on prices.
Inflation in Latvia remains higher than in the eurozone - it is forecasted at 2.9% this year, and a return to the 2% level is not expected in the near future. Experts emphasized that increased competition will play a crucial role in reducing prices, especially in the food sector.
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