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Latvia vs. Estonia

Economy

LatviaEstonia
Economy - overview

Latvia is a small, open economy with exports contributing more than half of GDP. Due to its geographical location, transit services are highly-developed, along with timber and wood-processing, agriculture and food products, and manufacturing of machinery and electronics industries. Corruption continues to be an impediment to attracting foreign direct investment and Latvia's low birth rate and decreasing population are major challenges to its long-term economic vitality.

Latvia's economy experienced GDP growth of more than 10% per year during 2006-07, but entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the slowing world economy. Triggered by the collapse of the second largest bank, GDP plunged by more than 14% in 2009 and, despite strong growth since 2011, the economy took until 2017 return to pre-crisis levels in real terms. Strong investment and consumption, the latter stoked by rising wages, helped the economy grow by more than 4% in 2017, while inflation rose to 3%. Continued gains in competitiveness and investment will be key to maintaining economic growth, especially in light of unfavorable demographic trends, including the emigration of skilled workers, and one of the highest levels of income inequality in the EU.

In the wake of the 2008-09 crisis, the IMF, EU, and other international donors provided substantial financial assistance to Latvia as part of an agreement to defend the currency's peg to the euro in exchange for the government's commitment to stringent austerity measures. The IMF/EU program successfully concluded in December 2011, although, the austerity measures imposed large social costs. The majority of companies, banks, and real estate have been privatized, although the state still holds sizable stakes in a few large enterprises, including 80% ownership of the Latvian national airline. Latvia officially joined the World Trade Organization in February 1999 and the EU in May 2004. Latvia also joined the euro zone in 2014 and the OECD in 2016.

Estonia, a member of the EU since 2004 and the euro zone since 2011, has a modern market-based economy and one of the higher per capita income levels in Central Europe and the Baltic region, but its economy is highly dependent on trade, leaving it vulnerable to external shocks. Estonia's successive governments have pursued a free market, pro-business economic agenda, and sound fiscal policies that have resulted in balanced budgets and the lowest debt-to-GDP ratio in the EU.

The economy benefits from strong electronics and telecommunications sectors and strong trade ties with Finland, Sweden, Germany, and Russia. The economy’s 4.9% GDP growth in 2017 was the fastest in the past six years, leaving the Estonian economy in its best position since the financial crisis 10 years ago. For the first time in many years, labor productivity increased faster than labor costs in 2017. Inflation also rose in 2017 to 3.5% alongside increased global prices for food and energy, which make up a large share of Estonia’s consumption.

Estonia is challenged by a shortage of labor, both skilled and unskilled, although the government has amended its immigration law to allow easier hiring of highly qualified foreign workers, and wage growth that outpaces productivity gains. The government is also pursuing efforts to boost productivity growth with a focus on innovations that emphasize technology start-ups and e-commerce.

GDP (purchasing power parity)
$54.02 billion (2017 est.)
$51.67 billion (2016 est.)
$50.55 billion (2015 est.)

note: data are in 2017 dollars

$41.65 billion (2017 est.)
$39.72 billion (2016 est.)
$38.92 billion (2015 est.)

note: data are in 2017 dollars

GDP - real growth rate
2.08% (2019 est.)
4.2% (2018 est.)
3.23% (2017 est.)
5% (2019 est.)
4.36% (2018 est.)
5.51% (2017 est.)
GDP - per capita (PPP)
$27,700 (2017 est.)
$26,200 (2016 est.)
$25,500 (2015 est.)

note: data are in 2017 dollars

$31,700 (2017 est.)
$30,200 (2016 est.)
$29,600 (2015 est.)

note: data are in 2017 dollars

GDP - composition by sector
agriculture: 3.9% (2017 est.)
industry: 22.4% (2017 est.)
services: 73.7% (2017 est.)
agriculture: 2.8% (2017 est.)
industry: 29.2% (2017 est.)
services: 68.1% (2017 est.)
Population below poverty line
25.5% (2015)
21.1% (2016 est.)
Household income or consumption by percentage share
lowest 10%: 2.2%
highest 10%: 26.3% (2015)
lowest 10%: 2.3%
highest 10%: 25.6% (2015)
Inflation rate (consumer prices)
2.9% (2017 est.)
0.1% (2016 est.)
3.7% (2017 est.)
0.8% (2016 est.)
Labor force
885,000 (2020 est.)
648,000 (2020 est.)
Labor force - by occupation
agriculture: 7.7%
industry: 24.1%
services: 68.1% (2016 est.)
agriculture: 2.7%
industry: 20.5%
services: 76.8% (2017 est.)
Unemployment rate
6.14% (2019 est.)
6.51% (2018 est.)
4.94% (2019 est.)
4.73% (2018 est.)
Distribution of family income - Gini index
34.5 (2015)
35.4 (2014)
34.8 (2015)
35.6 (2014)
Budget
revenues: 11.39 billion (2017 est.)
expenditures: 11.53 billion (2017 est.)
revenues: 10.37 billion (2017 est.)
expenditures: 10.44 billion (2017 est.)
Industries
processed foods, processed wood products, textiles, processed metals, pharmaceuticals, railroad cars, synthetic fibers, electronics
food, engineering, electronics, wood and wood products, textiles; information technology, telecommunications
Industrial production growth rate
10.6% (2017 est.)
9.5% (2017 est.)
Agriculture - products
grain, rapeseed, potatoes, vegetables; pork, poultry, milk, eggs; fish
grain, potatoes, vegetables; livestock and dairy products; fish
Exports
$12.84 billion (2017 est.)
$11.35 billion (2016 est.)
$13.44 billion (2017 est.)
$12.36 billion (2016 est.)
Exports - commodities
foodstuffs, wood and wood products, metals, machinery and equipment, textiles
machinery and electrical equipment 30%, food products and beverages 9%, mineral fuels 6%, wood and wood products 14%, articles of base metals 7%, furniture and bedding 11%, vehicles and parts 3%, chemicals 4% (2016 est.)
Exports - partners
Lithuania 15.8%, Russia 14%, Estonia 10.9%, Germany 6.9%, Sweden 5.7%, UK 4.9%, Poland 4.3%, Denmark 4.1% (2017)
Finland 16.2%, Sweden 13.5%, Latvia 9.2%, Russia 7.3%, Germany 6.9%, Lithuania 5.9% (2017)
Imports
$15.79 billion (2017 est.)
$13.61 billion (2016 est.)
$14.42 billion (2017 est.)
$13.23 billion (2016 est.)
Imports - commodities
machinery and equipment, consumer goods, chemicals, fuels, vehicles
machinery and electrical equipment 28%, mineral fuels 11%, food and food products 10%, vehicles 9%, chemical products 8%, metals 8% (2015 est.)
Imports - partners
Lithuania 17.6%, Germany 11.7%, Poland 8.7%, Estonia 7.6%, Russia 7.1%, Netherlands 4.2%, Finland 4.2%, Italy 4% (2017)
Finland 14%, Germany 10.7%, Lithuania 8.9%, Sweden 8.5%, Latvia 8.2%, Poland 7.2%, Russia 6.7%, Netherlands 5.9%, China 4.7% (2017)
Debt - external
$40.02 billion (31 March 2016 est.)
$38.19 billion (31 March 2015 est.)
$19.05 billion (31 December 2016 est.)
$18.3 billion (31 December 2015 est.)
Exchange rates
euros (EUR) per US dollar -
0.885 (2017 est.)
0.903 (2016 est.)
0.9214 (2015 est.)
0.885 (2014 est.)
0.7634 (2013 est.)
euros (EUR) per US dollar -
0.92 (2017 est.)
0.9 (2016 est.)
0.9214 (2015 est.)
0.885 (2014 est.)
0.7634 (2013 est.)
Fiscal year
calendar year
calendar year
Public debt
36.3% of GDP (2017 est.)
37.4% of GDP (2016 est.)

note: data cover general government debt, and includes debt instruments issued (or owned) by government entities, including sub-sectors of central government, state government, local government, and social security funds

9% of GDP (2017 est.)
9.4% of GDP (2016 est.)

note: data cover general government debt and include debt instruments issued (or owned) by government entities, including sub-sectors of central government, state government, local government, and social security funds

Reserves of foreign exchange and gold
$4.614 billion (31 December 2017 est.)
$3.514 billion (31 December 2016 est.)
$345 million (31 December 2017 est.)
$352.2 million (31 December 2016 est.)
Current Account Balance
-$222 million (2019 est.)
-$99 million (2018 est.)
$616 million (2019 est.)
$280 million (2018 est.)
GDP (official exchange rate)
$30.33 billion (2017 est.)
$25.97 billion (2017 est.)
Stock of direct foreign investment - at home
$18.84 billion (31 December 2017 est.)
$15.36 billion (31 December 2016 est.)
$27.05 billion (31 December 2017 est.)
$22.19 billion (31 December 2016 est.)
Stock of direct foreign investment - abroad
$3.402 billion (31 December 2017 est.)
$2.485 billion (31 December 2016 est.)
$10.96 billion (31 December 2017 est.)
$9.396 billion (31 December 2016 est.)
Market value of publicly traded shares
$6.76 billion (31 December 2016 est.)
$6.799 billion (31 December 2015 est.)
$7.127 billion (31 December 2014 est.)
$3.102 billion (31 December 2017 est.)
$2.407 billion (31 December 2016 est.)
$2.045 billion (31 December 2015 est.)
Central bank discount rate
0% (31 December 2017 est.)
0.05% (31 December 2015 est.)
0% (31 December 2017 est.)
0% (31 December 2016 est.)
Commercial bank prime lending rate
2.58% (31 December 2017 est.)
2.61% (31 December 2016 est.)
4.2% (31 December 2017 est.)
4.23% (31 December 2016 est.)
Stock of domestic credit
$17.27 billion (31 December 2017 est.)
$15.11 billion (31 December 2016 est.)
$24.25 billion (31 December 2017 est.)
$20.97 billion (31 December 2016 est.)
Stock of narrow money
$12.91 billion (31 December 2017 est.)
$10.71 billion (31 December 2016 est.)
$14.78 billion (31 December 2017 est.)
$11.8 billion (31 December 2016 est.)

note: see entry for the European Union for money supply for the entire euro area; the European Central Bank (ECB) controls monetary policy for the 18 members of the Economic and Monetary Union (EMU); individual members of the EMU do not control the quantity of money circulating within their own borders

Stock of broad money
$12.91 billion (31 December 2017 est.)
$10.71 billion (31 December 2016 est.)
$14.78 billion (31 December 2017 est.)
$11.8 billion (31 December 2016 est.)
Taxes and other revenues
37.5% (of GDP) (2017 est.)
39.9% (of GDP) (2017 est.)
Budget surplus (+) or deficit (-)
-0.5% (of GDP) (2017 est.)
-0.3% (of GDP) (2017 est.)
Unemployment, youth ages 15-24
total: 12.2%
male: 12.5%
female: 11.8% (2018 est.)
total: 11.8%
male: 12.3%
female: 11.4% (2018 est.)
GDP - composition, by end use
household consumption: 61.8% (2017 est.)
government consumption: 18.2% (2017 est.)
investment in fixed capital: 19.9% (2017 est.)
investment in inventories: 1.5% (2017 est.)
exports of goods and services: 60.6% (2017 est.)
imports of goods and services: -61.9% (2017 est.)
household consumption: 50.3% (2017 est.)
government consumption: 20.4% (2017 est.)
investment in fixed capital: 24% (2017 est.)
investment in inventories: 2.2% (2017 est.)
exports of goods and services: 77.2% (2017 est.)
imports of goods and services: -74% (2017 est.)
Gross national saving
20.7% of GDP (2017 est.)
21% of GDP (2016 est.)
21.8% of GDP (2015 est.)
27% of GDP (2017 est.)
24.6% of GDP (2016 est.)
25.8% of GDP (2015 est.)

Source: CIA Factbook