Latvia needs not just to increase production volumes but to transition to creating more complex and expensive goods with high added value, according to the Ministry of Economics report on the country's development.
Latvia's economic growth depends not only on the emergence of new enterprises but also on the ability of existing companies to become larger, more productive, and competitive in export markets, writes Diena.
This conclusion is contained in the report by the Ministry of Economics "On the Development of Latvia's Economy."
One of the key priorities identified by the ministry is the scaling of enterprises, increasing productivity, and improving access to capital. According to calculations by SEB banka, the 600 largest enterprises in the country — approximately 0.5% of the total number of companies — account for 52% of the total turnover of Latvian businesses and half of all tax revenues.
The Ministry of Economics emphasizes: the larger the enterprise, the higher its productivity. If companies with a turnover of up to 50,000 euros have an average productivity of 11,700 euros per employee, then enterprises with a turnover exceeding 50 million euros have nearly 48,000 euros per person.
The authorities have set a goal to increase the number of enterprises with an annual turnover of at least 50 million euros by about a third. This concerns approximately 70 companies that should grow to the level of large businesses.
However, experts point out that high turnover alone does not mean high added value. In the group of the largest enterprises, a significant portion consists of state and municipal companies, which are not expected to achieve maximum profitability. Moreover, almost half of the largest private companies operate in trade — an industry with relatively low added value.
Among large manufacturing enterprises in Latvia, woodworking and the food industry still dominate.
Bank of Latvia economist Oleg Krasnoperov believes that this is not enough for rapid growth in prosperity.
"Economic development does not mean producing the same things, just more. It is necessary to move towards creating unique, high-quality, and complex goods and services with high added value," notes the economist.
According to him, the country needs a structural transformation of the economy — a shift of resources from less productive sectors to more technological and profitable ones.
Experts warn that with the current specialization — woodworking, agriculture, and food production — Latvian companies find it difficult to compete in the global market without maintaining relatively low wages.
That is why increasing productivity and creating more complex products are seen as one of the main challenges for Latvia's economy in the coming years.
