Latvia has enjoyed continuing catch-up in per capita incomes with the more affluent OECD countries through the pandemic, despite slow progress in vaccination. Fiscal policy has handled the health-system challenges while protecting jobs and firms but could do more to ease inequality and poverty, especially among the elderly. Latvia’s population has been shrinking for decades and will continue to do so. This means it must focus on increasing employment among those of working age. That implies a need to tackle the large gender wage gap that is discouraging women’s labour force participation, delay retirement and keep everyone in good health. Nevertheless, public health-care spending is low, causing heavy out-of-pocket expenses, many unmet needs and, along with widespread poor lifestyle choices, short life expectancy. Looking ahead, further economic progress will depend on easing the supply of credit; overcoming remaining labour-market informality and official bribery and corruption; and encouraging greater exploitation of export-market opportunities. Enhancing export performance calls for redoubled efforts to boost skills of youth and adults so that digitalisation can proceed quickly, reforming the innovation system to intensify business and university R&D activities, improving transport infrastructure and the governance of state-owned enterprises, and smoothing the business environment for all firms.

SPECIAL FEATURES: AGEING, HEALTH CARE, EXPORTS