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 into 2015 and beyond, although we emphasize that strong headline real GDP growth is largely a result of statistical base effects. We see 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 forecast for Latvia's real GDP growth as the escalating trade war between the EU and Russia is adversely affecting Latvia's goods and services export prospects. We now forecast Latvia to grow by...

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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 is one of the smaller insurance markets in the eurozone with a small population and low income levels a limiting factor in total underwriting activity. However, there is potential for growth in the life and non-life segments as the government and firms are trying to increase awareness of insurance and other financial products and improve distribution channels. As such, we are optimistic premiums will grow at a steady rate in future.

With a population of just 2mn and lower income levels than most other eurozone members, Latvia is far from being considered a major market for European insurers. Insurance penetration and density are both low, especially in the life insurance segment which accounted...

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Medical Devices

Latvia Medical Devices

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BMI Industry View: The Latvian medical device market is expected to increase by a CAGR of 4.0% in US dollar terms over the 2013-2018 period, reaching USD182.3mn, or USD91 per capita. Domestic production is expected to remain geared towards satisfying the local market, and for export to other former USSR countries, as the technological sophistication of locally-produced medical devices does not yet match that in the West.

Headline Industry Forecasts

  • The medical equipment market grew strongly until 2008, but fell sharply...

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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: Latvia's port of Riga, the country's top facility in terms of both total tonnage and box throughput, is forecast to continue growth in 2015, after a double-digit increase in tonnage and continued, though more moderate, growth in container throughput over the past year. Riga's total tonnage is still being supported by high transit volumes of oil products and dry bulk, while its stable position in terms of box throughput is enhanced by a robust increase in volumes over the last five years. We expect further throughput growth at the port of Riga over the medium term. At the same time, Ventspils, the country's second-largest port in terms of total throughput...

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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:   Overall we maintain our outlooks for the Baltic states' tourism sectors over 2015. Although the countries stand to lose out due to the ongoing issues (both economic and political) arising from the Russia-Ukraine tensions, and this will constrain arrivals from these countries, we believe that these losses will largely be mitigated by increased inter-regional tourism within the three Baltic states, as well as from other European countries which increasingly view the Baltic region as a more stable alternative to Russia and Ukraine. In particular we feel that Lithuania's tourism sector could see substantial growth over the longer term if its bid to join the euro is successful, as it will facilitate multilateral tourist traffic from and to the eurozone. 

One of the main developments over 2014 has been the advancement of the proposal to include...

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