In-depth country-focused analysis on Latvia's economic, political and operational risk environment, complemented by detailed sector insight


Our comprehensive assessment of Latvia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Latvia, as well as the latest industry developments that could impact Latvia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Latvia before your competitors.

Country Risk

Latvia Country Risk

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Core Views

  • Latvia's economic recovery will continue in 2016, although we emphasize that labour market improvements are partly the result of high levels of emigration.

  • We see small but growing scope for the government to ease up on its long-held policy of fiscal austerity going forward.

  • The Russian embargo on EU agricultural goods has weakened the growth outlook and Latvia will be among the worst EU states affected.

  • Growth will remain subdued due to the need for further deleveraging.

Major Forecast Changes

  • We have downgraded our medium-term growth outlook, and forecast average real GDP growth of just 3.0% between 2017 and 2020, from a previous forecast of 3.4%.


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Latvia Industry Coverage (11)


Latvia Autos

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2014 has proved a positive year for new vehicle sales within Latvia. Over the first nine months of the year, passenger car (PC) sales were up by 19% year-on-year (y-o-y), at 9,239 units, according to figures from the European Auto Manufacturers Association (ACEA).

On the commercial vehicle side, 8M14 figures from ACEA show a total of 1,658 light commercial vehicles (LCVs) sold in country, with a further 754 medium and heavy commercial vehicles sold, plus a further 137 buses, for a total of 2,549 units sold year-to-date.

Adding the 2,549 CV units to the 8,445 PCs sold over 8M14 makes for a total new vehicle market of 10,994 units. On current sales trends, this leaves the Latvian new vehicle sales market on target to hit BMI's forecast of 16,384 units for the full year.

Looking forward, BMI's Country Risk team believes that the ongoing sanctions being...

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Commercial Banking

Latvia Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Food & Drink

Latvia Food & Drink

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BMI View:  We expect that household consumption will remain stable over 2015, contributing 1.7 percentage points to headline real GDP,. This will be supported by low inflation and an improving labour market. However, the deterioration in EU-Russia relations is adversely affecting Latvia's economic growth outlook. Western sanctions on Russia have led to capital flight and sharp depreciation of the rouble against the dollar, which has markedly worsened the growth outlook for Russia (which remains one of Latvia's most important trading partners). Russia's retaliatory embargo on EU agricultural goods will also leave Latvia among the worst affected, as Latvian agricultural exports to Russia account for almost 3% of total exports.

Headline Industry Data (local currency)

  • 2014...

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Freight Transport

Latvia Freight Transport

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Latvia's freight industry is inconveniently poised to feel the effects of the deterioration in trade relations between the EU and the Russian Federation. While on aggregate sanctions put in place by the West have not significantly affected the EU's growth outlook, they have hit Latvia hard. Russia is one of Latvia's largest trading partners, accounting for 10% of total exports, and both the visible goods and services trade is suffering as a direct result.

Nonetheless, tensions appear to have reached a plateau for the time being, with the EU opting not to enact any further sanctions on Russia in November, while Russia and Ukraine reached a deal which should lead to the resumption of gas supplies to Ukraine. This suggests that the risk of worst-case scenario for Latvia's banking sector, involving an intensification of capital and financial market sanctions on Russian assets, has declined slightly.

In 2015, growth across...

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Latvia Infrastructure

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BMI View: On the back of deteriorating relations between the EU and Russia over the Ukraine crisis, we have downgraded our 2015 forecast due to low confidence and poor economic performance limiting investment. Having said that, 2014 was the third consecutive year of double-digit growth in the construction industry, as it rebounds from a deep recession. EU transport and energy network funding will be a driver of growth to 2024, while housing and office demand will continue its strong sustainable recovery.

We estimate strong 2014 construction industry growth of 13.4% year-on-year (y-o-y) to EUR1.47bn (USD2.0bn), before moderating to a 5.4% increase and EUR1.56bn (USD2.0bn) in 2015. 2016 and 2017 will average 6% annual growth. To the end of our forecast period in 2024, growth will slow averaging a healthy, but unspectacular 4.6% annually.


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Latvia Insurance

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BMI View: Latvia's underwriting activity is limited due to its small size and relatively low income levels compared to other EU countries. We do, however, hold an optimistic view on premium growth in both the life and non-life insurance segments. Both the Latvian government and incumbent companies have indicated their commitment to improve awareness among the population of the benefits of insurance and other financial products.

Headline Insurance Forecasts (Latvia 2012-2019)
Indicator 2012 2013

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Medical Devices

Latvia Medical Devices

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BMI Industry View: The medical device market is expected to continue growing over the next five years, with a US dollar CAGR of 2.8% forecast for the 2014-2019 period. The market is largely supplied by imports, principally from Western suppliers. Domestic production has traditionally been geared towards satisfying the local market and exporting to other former Soviet countries, but we expect to see an increase in Latvian trade with fellow EU member states.


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Pharmaceuticals & Healthcare

Latvia Pharmaceuticals & Healthcare

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BMI View: The development of Latvia's market will be shaped by an increased emphasis on generic drugs; an implication of fiscal austerity measures. As a result, despite its transparent regulatory policies and business-friendly operating environment, the Latvian pharmaceutical market will continue to remain a modest prospect for drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: EUR319mn (USD428mn) in 2014 to EUR338mn (USD372mn) in 2015; +5.8% in local currency terms and -13.2% in US dollar terms. Forecast revised upwards slightly from previous quarter due to strong Q1 data.

  • Healthcare: EUR970mn (USD1.30bn) in 2014 to EUR1....

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Latvia Shipping

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BMI View: The latest data for January-July 2015 has led BMI to revise down its throughput forecasts for Latvia's largest port, the port of Riga. Total tonnage remains in growth, just, with a projected y-o-y increase of 1% forecast. Containers, however, are in decline, with BMI predicting a decrease y-o-y of 4.2%. We are holding with our 2016 forecast for both total tonnage and container throughput, with growth for both projected, we do however, highlight the risk to the port's total tonnage outlook, with Russia stating it will suspend its dry bulk transit shipment through the port.

Headline Industry Data...

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Latvia Telecommunications

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BMI View : Despite high mobile and broadband penetration, Latvia does not score highly relative to its neighbours on BMI 's proprietary Risk/Rewards Index for the telecommunications sector. The key reasons why it remains a lacklustre market in our eyes is that the mobile market has long been saturated and there is little incentive for operators to innovate in terms of services. The wireline market is contracting, despite consumers migrating to fibre-optic connections for their combined voice, broadband and TV needs. Lattelecom remains the dominant player as its principal rival - the newly-merged Baltcom / Izzi group - has yet to make significant strides on its plans to challenge the incumbent in the converged...

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Latvia Tourism

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BMI View: We continue to hold a broadly positive outlook for the Baltic countries' tourism sectors in 2016 and beyond. While these markets will continue to suffer the effects of political and economic turmoil in Russia and Ukraine, this will not prevent further robust growth in tourist arrivals. We expect growth to be supported by increased intra-Baltic and wider European tourism on the back of improving economic conditions across the continent. Of the three Baltic countries, we maintain our view that Latvia and Estonia will see the strongest arrivals growth over the next few years, averaging around 5-6% annually.

Key Updates & Forecasts

  • The Baltic region's tourism sector will continue to grow at a healthy rate in 2016 with visitor arrivals in Estonia, Latvia and Lithuania...

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