Castles in the air or a real plan? – The Ministry of Finance has set the goal of increasing Latvia’s GDP to 83 billion euros by 2035

The Ministry of Economy (ME) has set the goal of achieving Latvia’s GDP of 83 billion euros by 2035, according to the informative report on the development of Latvia’s economy prepared by the Ministry of Economy (ME), which will be conceptually reviewed by the government on Tuesday.

The stated target means that the size of the economy should double compared to the current situation. In order to achieve this, average economic growth rates of 4-5% per year must be reached in the coming years, under the condition that inflation remains stable within 2%.

In order to achieve the set goals, it is necessary to provide labor resources – at least 900,000 employees per year, to achieve an increase in the share of exports to at least 80% of GDP, to ensure an annual amount of private investment of at least 25% of GDP.

Productivity-based growth over the next 10 years can ensure an increase in the average monthly gross wage to at least 3,200 euros, the report says.

The Ministry of Economy states that the informative report was prepared to stimulate discussion and public debate in the Saeima about the challenges of Latvian economic development and the country’s growth priorities.

The basis of the report is the in-depth analysis of the situation reflected in the reports of the structural policy of the national economy, policy planning documents, including the government’s action plan.

Since Latvia’s accession to the European Union (EU), a number of significant economic structural policy changes have been made, which created preconditions and gave the opportunity to overcome the challenges caused by the financial crisis, the pandemic and the new geopolitical reality.

EM states that Latvia has a stable macro environment and good credit ratings. Although the geopolitical situation in the region has a negative impact on the economy, the need to increase the export and productivity of Latvian goods and services does not change. Initiatives started by the EU, such as the green course and digital transformation, are also relevant.

At the same time, the Ministry of Economy states that a fundamental prerequisite for Latvia’s development is basing the advantages of economic competitiveness on technological factors, production efficiency, innovations, as well as the ability to adapt and use the opportunities created by global changes.

In order to implement the government’s economic goal, it is necessary to significantly improve the availability of financing for businessmen and actively attract investments to the national economy, to make targeted state investments in the national economy, which, together with the investments of EU funds, including the Latvian Recovery and Resilience Mechanism, providing significant support to the productivity, digitalization, energy efficiency of Latvian entrepreneurs, for increasing export capacity and competitiveness, will make a significant contribution to Latvia’s economy, thus promoting the growth of Latvia’s national economy and increasing the volume of exports.

The main directions of action aimed at raising competitiveness as a basis for the growth of prosperity are investments in human capital, including the quality of education and public health, improvement of retraining and upgrading of qualifications and more efficient use of the workforce, attraction of talent and quality workforce.

Likewise, competitive business – resources for the development and modernization of companies, the implementation of new business ideas, support for the competitiveness of companies, the development of innovation systems and digitization. Reduction of bureaucracy – fast public processes – digitally transformed public administration.

At the same time, the direction of activity that requires attention is regionally balanced growth – well-paid jobs, globally competitive companies, connectivity of regional centers, available high-quality public services.

The EM indicates that attention should also be paid to modern infrastructure and affordable housing, including the need to remove bureaucratic obstacles to real estate development, renovation of the building stock and compliance with climate neutrality, availability of low-rent housing and development of the housing market, developed transport infrastructure and widely available public transport services mobility.

Climate change and investment in green infrastructure – energy independence and ambitious renewable energy projects – are also areas of action that require attention.

The EM indicates that Latvia’s economy should be based on the production of niche end-use products with higher added value and a developed cluster of local suppliers.

The advantages of Latvia’s competitiveness must be based on technological factors, improvement of production efficiency and innovations, to a lesser extent on cheap labor and low resource prices.

In the medium-term period, Latvia has opportunities to achieve the growth goals set in the policy planning documents and also in the declaration of the government headed by Evikas Silinas (JV), approved in the Saeima on September 15, 2023, the EM states.