Key Challenges

Opportunity to focus on new policy areas
The Latvian government has proven capable of focused and determined policy development. The growing economy presents opportunities to realign the tax burden and focus on long-term drivers of economic performance and growth such as education and innovation. It also permits a focus on long-neglected policy challenges, such as reducing social inequalities, reducing the risk of poverty and reforming the health sector in a meaningful manner. Some encouraging steps have been taken, but the government must now follow through on measures that will further shift the tax burden away from low-wage earners, improve healthcare access and quality, and reform education. The needs associated with these challenges are enormous, and must be balanced with fiscal prudence.
Addressing labor-market imbalances; building trust by engaging the public
If social inequality remains unaddressed, public trust will continue to slip, risking a further rise in emigration. The skills mismatch in the Latvian labor market has in the past created high unemployment rates coupled with a shortage of skilled labor. However, the more recent fall in the unemployment rate paired with rising wages indicates a tightening labor market. Negative demographic trends will exacerbate this situation in the future. The government should focus on policies that mitigate labor shortages, such as providing incentives for repatriation and creating immigration policies specifically designed to meet the demand for high-skilled labor. In addition, the government should emphasize the role of civic engagement in its decision-making. For example, when further implementing the territorial administrative reform and introducing new tools of participation, it should do so in an inclusive, transparent, and engaging manner.
Supporting civil society
The government should continue to create space for constructive civic engagement by building on the innovative public engagement platforms that have already been launched, and by channeling financial support to NGOs that engage in the policy process. While the government has offered significant support to some social partners, most NGOs remain dependent on rapidly declining foreign funding, as local funding has not filled the shortfall. In addition, the ongoing decline in voter turnout rates (only 54.6% of the eligible population voted in the 2018 election) is a strong indicator that government communication with the public needs to be improved.
Insufficient use of
expert opinion
While Latvia’s governance system is open to evidence-based policymaking and external advice, it remains underfunded, and the opinion of academic experts and NGOs is not always considered in the course of policy development. This became particularly obvious during the COVID-19 management efforts when a group of academics withdrew from cooperation with the government due to an ineffective and non-responsive process of communication.
Strategic approach
to corruption
The government should also continue to address barriers to economic development, such as the slow court system, inadequate insolvency procedures and corruption. While Latvia has taken some steps to strengthen the Corruption Prevention and Combating Bureau’s (KNAB) functional independence, greater effort should be made to implement a strategic approach in foreign bribery and money laundering investigations.
NATO gaining increasing importance
Given international tensions stemming from Russia’s activities, Latvia must continue to fulfill its NATO defense commitments as well as mitigate the economic effects of the sanctions imposed on Russia by the European Union. Latvia has been meeting its NATO spending commitment since 2018, which is a welcome development. However, resilience in the face of a hybrid war requires other types of spending. Further strengthening the independence, quality and reach of public broadcasting will be key to addressing the contradictory pro-EU and pro-Russian media narratives that are circulating. With adequate funding, these reforms could free the public broadcasting service from a reliance on advertising revenue.
Enhancing parliament’s research unit
The establishment of a parliamentary research unit in 2017 was a welcome step toward improving the parliament’s capacity for executive oversight. Unfortunately, the initial mandate for the research unit will have a limited impact on day-to-day legislative decision-making. The research unit should be given a broader mandate and employ more research staff, which would enable it to bring evidence-based analysis into the work of parliamentary committees.
Improving trust a
crucial objective
Finally, in the coming years, Latvia should invest time, effort and funding to improve the exceptionally low public trust in parliament and the executive. With the recent indicator as low as 16%, public trust has fallen dramatically. Policymakers should seek to rectify this by engaging in meaningful, respectful and consistent communication with the general public.

Party Polarization

Somewhat fragmented party system
Latvia has a multiparty system that is somewhat fragmented, but parties are generally able to reach agreements, and most decisions are not controversial. Polarization can be observed most clearly along social-values-related and ethnic/linguistic lines (the ethnic cleavage cuts across the usual left-right divide), and parties are broadly perceived as either representing Latvian or Russian speakers. Governing coalitions in recent years have been dominated by center-right parties pursuing a pro-European stance and liberal economic policies and promoting an (ethnic) Latvian identity.
Largest party is
Russophone, but
lacks power
The Saskaņa (Harmony) party, which has succeeded in consolidating the Russian-speaking vote, has been the largest parliamentary fraction since 2011. However, the party has never been part of a ruling coalition. No Russophone party has ever served in a coalition government in Latvia. (Score: 7)
University of Latvia, Social and Political Research Institute (2014). How Democratic is Latvia: Democracy Audit 2005 – 2014. Available at (in Latvian): its_2014_kopaa.pdf, Last assessed: 02.01.2019

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