Last year, the level of labor productivity in Latvia reached 54.1% of the average level of the European Union (EU) in current prices and 72.8% in purchasing power parity, said Inna Steinbuka, director of the Productivity Research Institute at the University of Latvia (LV PEAK), on Thursday during the presentation of the productivity report in Latvia for 2025.
Last year, productivity in Latvia increased by 3.5%, but it remains one of the lowest figures in the EU.
Steinbuka noted that productivity in Latvia has been continuously growing since 1995, but in recent years the growth has slowed down. In 1995, productivity in Latvia lagged behind the EU average by 88 percentage points, in 2008 by 60 percentage points, and in 2025 by 45.7 percentage points. Steinbuka believes that the productivity gap is still significant.
According to last year's study, the most productive sectors in Latvia were financial intermediation, real estate operations, electricity, and heating, while the least productive were education, agriculture and forestry, healthcare, and social care.
Factors enhancing productivity, according to Steinbuka, include investments and capital intensity, the ability to enter global value chains and export, digitalization and the implementation of artificial intelligence, investments in human capital, reducing bureaucracy, and improving the business environment. She stated that all these factors need to be developed simultaneously, and focusing only on one of them will not yield results.
Steinbuka also noted that the relatively low level of private investment in Latvia also affects productivity dynamics. The process of transforming the economy towards producing more technologically advanced products has slowed down, and the level of digital development in Latvia is below the EU average.
Other factors hindering productivity growth include a 20% reduction in the working-age population since 2000, increasing skills mismatches, a shortage of STEM and advanced expertise, and the fact that only 11% of adults receive education throughout their lives.
The report concludes that it is the quality and structural contribution of investments, rather than their volume, that will be crucial for future economic growth. High-potential technological sectors, including mechatronics, machine engineering, drone technology, and robotics, have been identified as priority areas for increasing productivity.
