The Cabinet of Ministers will consider a report on the prospects for the development of the Latvian economy today.
Today, the agenda of the government meeting includes a report from the Ministry of Economics on the development of the Latvian economy. The main theme of the multi-page report is that despite all global challenges, the goal remains the same. And the goal is to double the economy by 2035!
However, so far, there is nothing to indicate impending success. Economic breakthroughs are hindered by both long-standing unresolved domestic issues and global cataclysms, including the current crisis in the Middle East, which has already led to a spike in fuel prices, inflation, and will undoubtedly lead to a slowdown in economic growth.
But there are also positive trends pointed out by the authors of the report. Here are the most important conclusions from the Ministry of Finance's information message.
"In 2025, the economy returned to growth: GDP increased by 2.1%, investment volume rose by 9.8%, and lending to non-financial companies grew by 22.3%. The targets for the year set in the growth strategy were not only achieved but exceeded – total investments in the national economy reached 4.3 billion EUR, which is 16% more than planned. At the same time, external environment risks remain high: the conflict in the Middle East sharply increased oil and fuel prices, putting additional pressure on inflation and production costs.
To achieve the goal of doubling the economy in ten years, total investments of 181.5 billion are necessary, and public investments make up only one-fifth of this amount. Economic growth will be driven by private capital — the government's task is to create conditions under which the flow of private investments becomes natural and constant.
The analysis of microdata on enterprises conducted in the report based on the McKinsey Global Institute research methodology proves that productivity growth in Latvia is driven by a small number of enterprises - about 2.7% of enterprises create two-thirds of all positive productivity growth. In the Baltic ranking of the top 50, Latvia is represented by only 7 enterprises, and there are only 71 exporters with a turnover of over 50 million EUR in Latvia.
These data clearly indicate two complementary priorities for economic policy:
Priority No. 1 – Scaling Enterprises, Productivity, and Access to Capital
The Latvian economy lacks large enterprises. Their number in the Baltic top 50 is four times less than in Lithuania. Each enterprise that grows from medium to large directly impacts the productivity, export, and employment of the country...
In 2025, lending activity increased. The credit portfolio of the banking sector as a whole at the end of 2025 amounted to 17.2 billion euros, of which 16.2 billion euros were issued to internal non-bank clients. The growth of the credit portfolio for internal clients over the year was 12.6% compared to the end of 2024.
The volume of loans issued to internal enterprises increased by more than one-fifth (22.3%) by the end of 2025, while loans to households grew by 11.5% compared to the end of 2024. Moreover, despite the economic shocks caused by geopolitical tensions, the banking sector continued to operate profitably. At the same time, although lending to enterprises in Latvia grew rapidly, it is still insufficient and lags behind the European average credit portfolio level, which is necessary to reduce Latvia's structural lag in lending.
Inflation is most significantly influenced by the rise in global prices for energy resources and food. In 2025, the average annual inflation was higher than in 2024, reaching 3.7% in December. Price dynamics are influenced by fluctuations in global prices for energy resources and food, as well as an unstable geopolitical environment. Local tariff changes also had a significant impact — in particular, the increase in tariffs for housing-related energy resources and services throughout the year.
This gap between the necessary real growth of 4-5% and the projected growth of 1.7-2.9% is substantial, but it is not a reason to abandon the goal.
The actions proposed in this report are directly aimed at changing the trajectory of Latvia's growth, focusing on three interconnected drivers of productivity — scaling enterprises and access to capital, reducing bureaucratic burdens on small enterprises, and improving the quality of the workforce.
