Latvia

   

Policy Performance

#18

Economic Policies

#14
Showing strong recent gains, Latvia falls into the upper-middle ranks (rank 14) in the area of economic policy. Its score on this measure has improved by 0.7 points since 2014.

Growth rates have been strong and steady for a number of years. Since joining the euro zone in in 2014, the country’s economic focus has shifted to longer-term issues of competitiveness and inequality. A law capping the budget deficit is in place.

The overall unemployment rate has fallen dramatically in the past decade, but remains at a moderate 6.4%. Rising wages with labor shortages indicate a tightening labor market. The primary labor-market issues include the rapidly shrinking working-age population, internal migration out of rural regions, and high levels of net emigration.

A significant tax reform aimed at reducing inequality came into effect in 2018. However, observers say more as needed, as it did little to help the lowest-income households. Budget deficits have been at or below 1% of GDP for years, paired with low levels of general government debt by EU standards. The banking system remains stable, with capital levels well above the euro zone average.

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 is unchanged relative to 2014.

Education reform has been a key government focus. However, progress in consolidating the excess number of higher-education institutions has been slow. Teachers’ salaries have been increased, but remain low. Income disparities and the poverty rate are quite high. The small guaranteed minimum income has been increased, but may be gradually phased out.

Healthcare spending levels are low by OECD standards. Less than 60% of costs are covered by public schemes. As households pay for more than 40% of direct costs, people often delay or avoid seeking care. 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. Automatic citizenship has been granted to children of the long-term residents who were not naturalized after independence from the Soviet Union. Crime rates are low.

Environmental Policies

#9
With generally good environmental-performance outcomes, Latvia scores well overall (rank 9) with regard to environmental policies. Its score on this measure has improved by 0.2 points relative to 2014.

The country has made progress in decoupling economic growth from environmental pressures such as greenhouse gas emissions and most air pollutants. The use of renewable energy sources has increased, and access to and the quality of water and waste services have improved. The regulatory framework for environmental management is strong.

External observers have noted that the country’s goals remain relatively unambitious. Waste management in particular has been a challenge. The OECD has called for more investment in green public procurement, eco-labeling and market incentives, as well as for better enforcement of existing laws. Protection of forests is well organized.

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

#12
With generally fair electoral procedures, Latvia scores well overall (rank 12) 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 subject to penalty. Courts have been slow to deal with violations, however. The public broadcaster has been subject to political influence through a politically appointed oversight body. Local newspapers are feeling increasing competitive pressure from government-owned publications.

Civil rights and political liberties 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. Views on same-sex partnerships are intensely polarized, and discrimination on the basis of sexual orientation is poorly regulated.

Courts are independent but overloaded, with access regulated through the imposition of fees and security deposits. International groups have highlighted the uncertainty of bureaucratic decisions as a problem. A number of key political figures have been investigated and/or charged with corruption.

Governance

#21

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 “collaboration council” meets regularly to coordinate the work of the governing coalition.

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. A process of significantly reducing the number of municipalities is in its early stages. 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

#37
With notable oversight weaknesses, Latvia falls into the bottom ranks (rank 37) with regard to executive accountability. Its score on this measure has improved by 0.1 point 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 has called repeatedly for greater enforcement powers, while the extra-parliamentary ombuds office is 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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