Pension Savings of Residents of Latvia Turned Out to Be Unpatriotic 0 10

The document notes that an important condition for the development of the capital market is the availability of a sufficient volume of savings from local non-financial enterprises and households that can be directed towards investments.

There are several indicators that indirectly suggest that such potential exists in Latvia. For example, the ratio of loans to deposits in the Latvian banking sector is 64 percent, which is one of the lowest figures in the eurozone, where this figure averages around 94 percent. This means that a significant portion of the funds deposited in Latvian credit institutions is not used to finance the economy. One solution to improve the situation may be to mobilize these funds using local capital market instruments.

The review also notes that the second-level pension system savings in Latvia have significantly increased over the past 15 years; however, the share invested in Latvian assets has sharply decreased—from 61.6 percent in 2010 to 7.9 percent in 2024. This is significantly lower than the share of pension fund investments in the local markets of Lithuania and Estonia, which are 22.9 percent and 12 percent, respectively.

These data show that there are sufficient available savings, and the experience of neighboring countries indicates the possibility of directing a relatively larger portion of funds towards the development of the domestic capital market. The underdevelopment of the Latvian capital market is associated not only with insufficient demand from investors but also with limited supply, the review states. According to the document, the potential of the capital market as an alternative source of financing is not being fully utilized. For example, the total market value of the shares of Latvian companies at the end of 2024 was the lowest in the eurozone. The situation was further exacerbated by the decision of the joint-stock company Latvijas gāze to delist its shares from the exchange.