2013 Index of Economic Freedom

Latvia

overall score66.5
world rank55
Rule of Law

Property Rights50.0

Freedom From Corruption42.0

Limited Government

Government Spending53.6

Fiscal Freedom84.4

Regulatory Efficiency

Business Freedom75.7

Labor Freedom64.4

Monetary Freedom78.3

Open Markets

Trade Freedom86.8

Investment Freedom80.0

Financial Freedom50.0

Embed This Data

Create a Comparison Chart

See how Latvia compares to another country using any of the measures in the Index.

vs
Close
Download PDF
Quick Facts
  • Population:
    • 2.2 million
  • GDP (PPP):
    • $34.9 billion
    • 5.5% growth
    • -1.7% 5-year compound annual growth
    • $15,662 per capita
  • Unemployment:
    • 15.4%
  • Inflation (CPI):
    • 4.2%
  • FDI Inflow:
    • $1.6 billion
Embed This Data

Latvia’s economic freedom score is 66.5, making its economy the 55th freest in the 2013 Index. Its score is 1.3 points better than last year due to significantly improved scores in the management of government spending and labor freedom. Latvia is ranked 25th out of 43 countries in the Europe region, and its overall score is above the world average.

The global financial and economic turmoil took a heavy toll on Latvia, but the economy has gradually been recovering from the severe shock of the crisis, particularly since mid-2010, with determined budget-cutting measures. The political leadership appears to be committed to reform, and Latvia is now better positioned than some other countries in the region to achieve economic stabilization and regain robust levels of economic growth.

Latvia’s ongoing transition to a more dynamic and market-oriented economy has been facilitated by openness to foreign trade and the efficiency of business regulations designed to promote entrepreneurial activity. However, lingering corruption, exacerbated by a relatively inefficient judicial system, will undermine long-term competitiveness if left unaddressed.

Close

Background

Latvia regained its independence from the Soviet Union in 1991 and joined the European Union and NATO in 2004. A pro-Russia party won the September 2011 parliamentary elections, but Prime Minister Valdis Dombrovskis formed a center-right coalition without it. A referendum on making Russian an official language failed in February 2012, demonstrating Latvia’s deep ethnic divisions. The economy is developing its financial and transportation services, banking, electronics manufacturing, and dairy but was hit hard by the global financial crisis. Latvia is seeking membership in the Organisation for Economic Co-operation and Development. After losing a fifth of its output in the 2008–2009 crisis, the economy has resumed reasonable growth following an IMF-backed fiscal adjustment program. Formal-sector unemployment remains slightly below 16 percent.

Rule of LawView Methodology

Property Rights 50.0 Create a Graph using this measurement

Freedom From Corruption 42.0 Create a Graph using this measurement

The constitution guarantees the right to private ownership. The judiciary is constitutionally independent, but the court system remains inefficient and subject to long delays. A legal framework for the protection of intellectual property is in place, but enforcement is weak. Money laundering has been linked to tax evasion and the proceeds from Russian organized crime. Deep-rooted high-level corruption continues to cause concern.

Limited GovernmentView Methodology

The income tax rate is a flat 25 percent, and the corporate tax rate is a flat 15 percent. Other taxes include a value-added tax (VAT) and excise taxes. The overall tax burden amounts to 26.7 percent of total domestic income. Government spending is equivalent to 39.3 percent of GDP. The budget deficit, although declining, has been chronically high in recent years, and public debt is around 40 percent of GDP.

Regulatory EfficiencyView Methodology

The overall regulatory framework is relatively efficient, and business start-up has been streamlined. Completing licensing requirements is less costly but still takes more than 200 days. The labor market lacks flexibility; non-salary costs of employing workers are high, and restrictions on work hours are rigid. Inflation has been declining. The government continues to influence prices through state-owned enterprises.

Open MarketsView Methodology

The trade-weighted average tariff rate is a low 1.6 percent as with other members of the European Union, and there are relatively few non-tariff barriers. Investment regulations are relatively transparent but slow in application. The financial sector has undergone regulatory adjustments since early 2009, with the government providing capital injections. The banking sector remains stable, and non-performing loans are declining.

Country's Score Over Time

Bar Graph of Latvia Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Latvia to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
See Entire Region List ›

View all countries ›

Back to Top