#1 Latvia by BalticLegal 05.03.2023 17:24

Latvia is a country in Eastern Europe and one of the Baltic countries - the three countries that lie on the east coast of the Baltic Sea: Latvia, Lithuania and Estonia. Historically, Latvia has been part of numerous other political entities, including Old Livonia, the Polish-Lithuanian Commonwealth, the Russian Empire and the USSR. Finally, the country gained independence in 1991.

Since the 13th century Latvia was an important trading hub and a bridge between Eastern Europe and the rest of the continent, it was also an important member of the Hanseatic League and it dominated maritime trade in the Baltic Sea until the 16th century. Today, Latvia is an independent market and an important economic player in the Baltic States.

In recent decades, Latvia has implemented a number of reforms in support of trade and the internal market, which have proved successful and improved the business environment. The amount of foreign investment and domestic consumption has increased during this period (except for a setback during the 2008-2009 crisis), showing that both Latvian residents and foreign investors have confidence in Latvia's current economic environment.

The already mentioned crisis of 2008-2009 strongly affected the economy of Latvia, as it happened in many other countries. There has been a 17% fall in GDP and a peak in unemployment of 17% (more than 20% according to some estimates), and the situation peaked in 2010, just after the crisis. The economy entered the phase of contraction, during which the so-called informal economy or shadow/unofficial economy occupied about 40% of the whole Latvian economy.

From 2010 to 2012, Latvia implemented various economic reforms and projects to restore damage economy. With the help of international funds, the country finally announced in 2012 that the economy was growing steadily again. This claim was also approved by the International Monetary Fund (IMF). GDP, exports and domestic consumption grew, and unemployment fell to around 9.5% in 2016 (almost double the crisis-era low).

Economic sectors
Traditionally, there are four economic sectors: agriculture (including mining and extraction of natural resources), industry and manufacturing, services and information technologies (and other knowledge-based areas). Like the majority of the world's most developed countries, Latvia relies on the tertiary and quaternary sectors, namely services and knowledge-based industries.

Agriculture in Latvia
The agricultural sector accounts for 4% of Latvia's GDP and employs approximately 7.7% of the population. The main industries within the agricultural sector are grain production, livestock, potatoes, sugar beet and other vegetables. The main agricultural export product is timber, as Latvia is rich in forests and forestry is generally well developed in the country. Apart from that, however, Latvia's resources are scarce and therefore not very developed. This applies in particular to energy-related resources - these and their products are mainly imported from abroad.

Industry in Latvia
The industrial sector is the second most developed economic sector in Latvia. It contributes 24% to the country's GDP and around 28% of the labor force is employed in this sector. The most developed industries are metal processing, food processing and construction. Recently, high-tech industry is also undergoing significant development, and although this sphere is not currently an important branch, it is expected that this sphere will make an important contribution to the Latvian economy.

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