Latvia

   

Policy Performance

#20

Economic Policies

#22
Despite recent gains, Latvia falls into the middle of the pack (rank 22) in the area of economic policy. Its score on this measure has improved by 0.8 points since 2014.

Growth rates have been strong and rising. 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 moderate, unemployment rates have fallen dramatically in the past half-decade. Structural unemployment is a concern. Minimum monthly wage levels have been steadily increased for the last several years. Rising wages with labor shortages indicate a tightening labor market.

A significant tax reform aimed at reducing inequality came into effect in 2018. Social-security contribution rates have been increased slightly to bolster the health care system. Budget deficits have been below 1% of GDP for years, paired with low levels of general government debt. Despite the suspension of a large bank following money-laundering allegations, the banking system remains solid.

Social Policies

#32
With a mixed safety-net record, Latvia scores relatively poorly overall (rank 32) with regard to social policies. Its score on this measure has declined by 0.1 point since 2014.

Education reform has been a key government focus. Schools are being consolidated, and a curriculum reform is underway, and minority-language schools are being phased out. Teachers’ salaries are low, and high retirement rates are a concern. The poverty rate is quite high, with social-protection spending below the European average. The small guaranteed minimum income has been increased.

The universal single-payer health care system is being transformed into an insurance-based system, with full services available to those paying social-security contributions, along with children and pensioners, and reduced services available to others. Parental-leave benefits are generous, and the employment rate among women is above the EU average.

Pension benefits are low, with retiree poverty a serious problem. Integration policies for migrants and refugees are undeveloped. Some politicians are calling for legislation strengthening the importance of the Latvian language in the private sector. Crime rates are low.

Environmental Policies

#12
With generally good environmental-performance outcomes, Latvia scores well overall (rank 12) 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.

Air quality is good, and the amount of household waste generated per capita is below the EU average.

Climate-change policy has been a somewhat weak point in recent years. 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

#12

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. Campaign spending is capped, with infringements sanctioned. 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 some concerns over prison conditions have emerged. The parliament has not ratified the Istanbul Convention, hindering the state’s ability to address domestic violence. A rule requiring “loyalty” from public-school teachers has been controversial. A whistleblower-protection law was passed in 2018

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 an occasional problem. A new director may help restore public trust in the conflict-torn anti-corruption body.

Governance

#23

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 has declined by 0.1 point relative to its 2014 level.

A recently established government planning unit has expanded strategic capacities, helping to review line-ministry proposals. Coalition parties have broad influence over the ministries they control, weakening the prime minister’s power. An informal coalition-council structure whose secrecy led to controversy has been replaced by a “collaboration council” with similar coordinating functions.

RIAs are required for all draft proposals, but lack a specific sustainability review. Ex post evaluations are carried out for planning documents, but there is no standard approach for legislation. Public consultation is frequent, but its impact is often limited. While ministerial compliance is overall strong, disagreements between ministers regularly become public.

Domestic adaptability to EU norms has proven substantial. Local governments are sometimes subject to unfunded mandates, but also tend to have poor financial-management capabilities. A public-sector reform process underway, with the aim of increasing administrative quality and efficiency. Efforts to improve regulatory enforcement, particularly in the banking sector, have improved.

Executive Accountability

#36
With notable oversight weaknesses, Latvia falls into the bottom ranks (rank 36) with regard to executive accountability. Its score on this measure has improved by 0.2 points relative to its 2014 level.

Parliamentarians’ resources are very limited, despite adequate formal oversight powers. A parliamentary research unit was recently created, but it cannot respond to ongoing legislative work. The independent audit office lacks the power to audit the parliament, but the extra-parliamentary ombuds office has been increasingly active. The data inspectorate is subordinate to the Ministry of Justice.

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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