The increase in the share of the shadow economy is a clear indication that Latvia is moving in the wrong direction, announced the Prime Minister of Latvia Andris Kulbergs.
"In 2025, the share of the shadow economy in Latvia grew to 21.8% of GDP, and 'envelope' salaries account for almost half of the entire shadow economy. I believe this is an accurate diagnosis of the fact that we have been moving in the wrong direction. Moreover, I am convinced that the real situation is significantly worse," said the Prime Minister.
In his opinion, the problem lies in the system itself, which makes honest entrepreneurs feel that they are not being heard.
Kulbergs believes that reducing the shadow economy should not be done by increasing control, but by creating conditions under which legal employment is more advantageous than illegal employment.
According to him, it is still too expensive to officially employ workers in Latvia, especially in small businesses, regions, and for part-time work. Therefore, the norm regarding minimum social contributions should be reconsidered in cases where a person works a single job with reduced hours.
"If a person is objectively working part-time, seasonally, or a few days a week, the employer is forced to choose between not hiring an employee and paying part of the salary in an envelope," noted Kulbergs.
As reported bb.lv, according to the Shadow Economy Index study, in 2025, its share in Latvia increased by 0.4 percentage points compared to the previous year, reaching 21.8% of GDP.
In Estonia, the share of the shadow economy grew from 19.5% of GDP in 2024 to 20.8% in 2025. In Lithuania, on the contrary, the figure decreased by 1.1 percentage points to 23.6% of GDP.
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