The Bank of Latvia will hold an expert discussion on September 9 titled "From Log to Microchip: Where is the Value of Latvian Exports Really Created?" the central bank reported.
Bank of Latvia economist Oleg Krasnopyorov will present the results of a new study on structural changes in the Latvian economy and exports. In particular, the discussion will focus on how successfully the country's enterprises are able to transform wood and agricultural raw materials into high value-added products and how exports are developing in the chemical and pharmaceutical industries, electronics, machine engineering, vehicle manufacturing, and the service sector.
After the presentation, there will be a discussion involving representatives from business, the Ministry of Economics, and the Bank of Latvia. The event will take place on September 9 from 1:00 PM to 3:00 PM at the central building of the Bank of Latvia in Riga, and an online broadcast will also be available.
As Krasnopyorov noted earlier, Latvia exports simpler products than its neighboring European Union countries, although economic development suggests a gradual transition to the production and export of more complex goods.
According to the economist, economic development is not just about increasing the volume of existing products. Structural transformation is necessary, whereby resources gradually shift from low value-added sectors to areas capable of creating more complex and expensive products.
The most complex goods today are primarily concentrated in electronics, the chemical and pharmaceutical industries, machine engineering, and vehicle manufacturing. Their production requires modern technologies, skilled specialists, and a favorable investment environment. Countries specializing in such products, such as Germany, Switzerland, and Japan, typically exhibit high labor productivity and wage levels.
Equally important is the export of services — from education, healthcare, and transport to marketing, artificial intelligence models, and cybersecurity software. Krasnopyorov emphasizes that without developed services, modern industry cannot become more technological and complex.
At the other end of the scale are raw materials, agricultural and food products, woodworking, and textiles. Specialization primarily in simple goods, according to the economist, is usually characteristic of countries with lower productivity and wages.
Latvia Lags Behind Lithuania and Estonia
Krasnopyorov believes that the only way for Latvia to significantly increase its prosperity and at least reach the income levels of Lithuania and Estonia is to learn how to produce complex and unique products that are in demand in the global market and export them.
It is not necessary to produce all goods within one country. The modern economy is built on international supply chains. For example, Slovenia exports medicines produced in part using imported raw materials and equipment, while Slovakia exports cars made from components supplied from other countries.
This does not mean that Latvia should abandon its food industry or woodworking due to the relatively low average added value of these sectors. The task is to learn how to produce more expensive and technologically advanced products from wood and agricultural raw materials that are in demand in the global market.
Krasnopyorov cites the United States — the world's largest exporter of grains — and Norway, the largest exporter of fish. However, such products account for only a small part of the total exports of these developed economies.
Latvia Ranks 39th in Export Complexity
The economist suggests comparing Latvia with a group of geographically and developmentally similar EU countries — Lithuania, Estonia, Poland, the Czech Republic, Hungary, Romania, Slovakia, and Slovenia.
In the global ranking of export complexity, Latvia ranks 39th, while Estonia is in 28th place and Lithuania in 30th. Among this group of countries, Latvia has remained last since 2012.
After joining the EU, Lithuania rose 16 positions in the ranking, Estonia six, while Latvia fell two.
Chemicals, pharmaceuticals, machine engineering, vehicles, and electronics account for about one-third of Latvia's gross exports — the lowest figure among the EU countries considered.
At the same time, Latvia ranks first among EU countries in the share of agricultural products, food, and woodworking in exports. This occurs despite the fact that the share of forests in the total land area of the country is less than, for example, in Estonia or Slovenia.
The economist emphasizes that the ability to produce complex products is not an innate advantage — it can be developed. Thirty years ago, none of the considered Central and Eastern European countries specialized in exporting machine engineering products and vehicles. Today, Slovakia and the Czech Republic hold particularly strong positions in these industries.
Among the Baltic countries, Estonia has successfully developed specialization in electronics, while Lithuania has focused on the chemical industry. According to Krasnopyorov, this has allowed neighbors to increase production and exports in high-productivity sectors more quickly.
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