Latvia

   

Policy Performance

#17

Economic Policies

#20
Despite considerable recent gains, Latvia falls into the middle of the pack (rank 20) in the area of economic policy. Its score on this measure has improved by 0.7 points since 2014.

Growth rates have rebounded, reaching moderate levels in 2016 and accelerating further in 2017. Since joining the euro zone in in 2014, the country’s economic focus has shifted to longer-term issues of competitiveness and inequality. A budget-cap law is in place, but some structural reforms have met with resistance.

Though remaining moderately high, unemployment rates have fallen dramatically in the past half-decade, thanks in part to labor flight to Western Europe. Structural unemployment is a concern. Minimum monthly wage levels have been steadily increased for the last several years.

Property-tax increases and a dividend tax have shifted the tax burden away from low-income wage earners. A significant tax reform aimed at reducing inequality was slated to come into effect in 2018. Budget deficits have been very low, reaching balance in 2016. The systemic banking-system risk posed by non-resident depositors has declined. The country’s innovation record has improved.

Social Policies

#33
With a mixed safety-net record, Latvia scores relatively poorly overall (rank 33) with regard to social policies. Its score on this measure has declined by 0.1 point since 2014.

Education outcomes as measured by testing have declined in recent years. Education funding levels are low, with teacher retirement rates a concern. Schools are being consolidated, and a curriculum reform is underway. A new tax reform may help reduce the substantial income inequality. High emigration rates indicate the perceived lack of opportunity.

A single-payer universal health care system is in place, delivering effective care despite being underfunded. Out-of-pocket expenses are significant, and waiting times are long. A proposed health system reform would increase spending but push many people off the coverage rolls. Parental-leave benefits are generous, and the employment rate among women is above the EU average.

Pension benefits are low, but the introduction of a three-pillar system has made it largely sustainable. Policies for migrants and refugees are weak. Integrating long-term non-citizens remains a challenge. Crime rates are low.

Environmental Policies

#9
With generally good environmental-performance outcomes, Latvia receives high rankings internationally (rank 9) with regard to environmental policies. Its score on this measure has declined by 0.1 point relative to 2014.

The country shows strengths in water-resource management, environmental-health policy and biodiversity, though weaknesses on forests, agriculture and fisheries are evident. A recently adopted environmental strategy will use natural-resources tax revenues to fund waste-water management and R&D.

The Climate Change Financial Instrument, funded through the International Emissions Trading Scheme, is the country’s main climate-change policy mechanism. The country complies with UN climate agreements and other international guidelines, and follows EU climate policy, but is not an agenda-setter.

Democracy

#11

Quality of Democracy

#11
With generally fair electoral procedures, Latvia scores well overall (rank 11) with regard to democracy quality. Its score on this measure has declined by 0.2 points relative to 2014.

Parties receive public and private funding, and campaign spending is capped. Concerns include off-book expenditures and payments made to influence media reporting. Leaked transcripts have revealed outside political influence at major print- and broadcast-media organizations. Local newspapers are feeling increasing competitive pressure from government-owned publications.

Civil rights are generally protected, but concerns over prison conditions and privacy protections have emerged. Ethnic discrimination is an issue often in the media, with public rhetoric occasionally inflammatory. A new rule requiring “loyalty” from public-school teachers has been controversial. A significant share (11%) of residents cannot vote, being non-citizens.

Courts are independent but overloaded, with access regulated through the imposition of fees and security deposits. International groups have questioned the predictability of legal outcomes. Corruption remains a problem. A new director may help restore public trust in the primary anti-corruption body.

Governance

#24

Executive Capacity

#7
With significant strategic capability, Latvia receives a high overall ranking (rank 7) in the area of executive capacity. Its score on this measure is unchanged relative to its 2014 level.

A recently established core-government planning unit has expanded strategic capacities, helping to review line-ministry proposals. However, its recommendations are sometimes discarded for political expediency’s sake. Coalition parties have broad influence over the ministries they control, weakening the prime minister’s power. Cabinet committees play an integral decision-making role.

RIAs are required for all draft proposals, but lack a specific sustainability review. Consultation with social groups was more robust than usual on the 2017 tax reform. However, public consultation more generally rarely results in policy-quality improvement or greater public support. While ministerial compliance is overall strong, disagreements between ministers regularly become public.

The government has a generally strong achievement record, with some notable gaps. Domestic adaptability to EU norms has proven substantial, and the country joined the OECD in 2016. Local governments are sometimes subject to unfunded mandates, but also tend to have poor financial-management capabilities.

Executive Accountability

#34
With notable oversight weaknesses, Latvia receives low rankings in international comparison (rank 34) with regard to executive accountability. Its score on this measure is unchanged relative to its 2014 level.

Parliamentarians’ resources are very limited, despite adequate formal oversight powers. A new parliamentary research unit has been created, but it cannot respond to ongoing legislative work. The independent audit office lacks the power to audit the parliament. The extra-parliamentary ombuds office has been increasingly active and visible.

Citizens are slow to engage with the political process, with few belonging to political parties. Few of the main media brands offer high-quality analysis, and some allow content to be influenced by commercial or political advertisers. The public media produce strong investigative work. The proliferation of pro-Russian narratives in the media and online has become a challenge.

Economic associations are sophisticated, influencing policy through the Tripartite Council. Non-economic NGOs have joined together to seek a greater voice in the government’s budget-planning process.
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