Last year, the share of the shadow economy in Latvia increased by 0.4 percentage points compared to the previous year, amounting to 21.8% of the gross domestic product (GDP), reported on Monday the director of the Sustainable Business Center of the Riga Graduate School of Economics, Arnis Sauka, at a conference dedicated to the shadow economy in Latvia.
At the same time, in Estonia, the share of the shadow economy grew from 19.5% of GDP in 2024 to 20.8% of GDP in 2025, while in Lithuania, the share of the shadow economy in 2025 decreased by 1.1 percentage points compared to 2024, amounting to 23.6% of GDP.
Sauka acknowledged that the trend of reducing the shadow economy, which had been observed in Latvia since 2022, came to a halt last year. At the same time, Sauka emphasized that there are no longer statistically significant differences in the volumes of the shadow economy among the Baltic countries.
The results of the shadow economy index study indicate that the most significant component of the shadow economy in Latvia in 2025 was "envelope wages," which accounted for 47.1% of the total shadow economy.
In turn, another component - undeclared income - constituted 25.5% of the total volume of the shadow economy in Latvia in 2025, while undeclared workers made up 27.4%.
The share of the average salary that entrepreneurs hide from the state, that is, envelope wages, decreased by 1.1 percentage points in 2025 compared to 2024, amounting to 19.6%.
In terms of undeclared income or profit, there was a decrease of 0.4 percentage points in Latvia in 2025 compared to 2024, from 15.2% to 14.8%.
Undeclared workers in Latvia in 2025 accounted for 10%, which is 0.9 percentage points lower than in 2024.
In 2025, compared to 2024, the average percentage of the contract amount for securing state orders in Latvia decreased from 7.8% to 6.2%.
Among sectors, the highest share of the shadow economy in Latvia remained in construction at 29.5%, which is 4.3 percentage points lower compared to 2024. The share of the shadow economy in retail trade in Latvia last year was 24.5%, while in 2024 it was 26.2%; in the service sector, it was 22.3% (in 2024 - 23.6%); in manufacturing, it was 19.2% (in 2024 - 17.3%); and in wholesale trade, it was 15.6% compared to 13% in 2024.
On a scale of one to five, satisfaction with the state tax policy in Latvia increased from 2.65 in 2024 to 2.76 points in 2024.
Last year, satisfaction among entrepreneurs with the quality of business regulation also slightly increased: on a scale of one to five in Latvia, it rose from 3.06 in 2024 to 3.13 last year.
Satisfaction among entrepreneurs with the work of the State Revenue Service on a scale of one to five increased last year in Latvia to 3.67 points (in 2024 - 3.6).
