Can convergence keep up with a declining population?
After more than 50 years as part of the Soviet Union, Latvia regained independence in 1991 and set out on the road to independent democracy and a social market economy. The transition from a centrally planned system to a market economy required a complete overhaul of key economic institutions. EU membership in 2004 further enhanced the successful transition. In line with the EU’s current policy priorities, Latvia seeks to take on the green and digital transitions, expecting positive effects for its economy and labour market, with support from the European Recovery and Resilience Facility.
Latvia has been able to maintain a strong convergence towards the average EU per capita income in the past 25 years although the process is slightly slower than in the other Baltic states. While in the early 1990s, the per capita GDP was below 25% of the EU average, it reached 70% in 2020. Backed by economic growth, unemployment continued to decrease to 6.3% in 2019 but rose to 8.1% in 2020 due to the pandemic. Youth unemployment went down to 12% in 2019 from 36% in 2010 during the Great Recession, rising to almost 15% in 2020. The overall employment rate has consistently remained higher than the EU average (77% vs. 72% in 2020). Continue reading
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