Members Countries

Economy

• Real GDP Growth
• GDP per capita (at current prices), EUR*

Trends

The aim of the long-term development strategy of Latvia is to ensure the transition from the labour-intensive economy to the knowledge economy and in this way to reach the average per capita GDP levels of the EU member states in the next 20-30 years.

Long-term Economic Strategy of Latvia defines basic positions of the economic policy. It is planned to change the currently dominating model of the Latvian economy as it is mostly based on the use of cheap labour and production with low value added. The offered way: intensive use of knowledge and high technologies, transition from labour-intensive economy to knowledge-intensive economy. This may be reached by simultaneous revival of traditional sectors of national economy on a modern technological base and the development of new, post-industrial knowledge-intensive sectors. Latvia will create the new economy and the importance of knowledge as a resource and wealth will grow in all sectors

Politics

• Party in power: LPP Latvian First Party LZS Center Party Latvian Farmers Union TP National Party JL New Era
• Major issues on the agenda: EU-membership, European Parlamentary selection

Labour market

• Employment rate
• Number of employed persons, thsds

The number of employed persons has slightly gone up in the last three years. Yet, growth of employment substantially lags behind the general economic growth rate. These processes for national economy of Latvia are objective given the low level of productivity of the economy. Therefore, also future growth will be mostly based on the growth of productivity and much less resulting in the growth of the number of employed people.

• Unemployment rate (at end of period), %

• Job growth: The government carries out different measures to improve the situation in the area of employment. These measures are included in the annual National Employment Plan (NEP). NEP for the year 2003 contains a list of 56 activities for the amount of 22.5 million LVL. Measures contained in NEP are mainly focussed on perfection of working skills and support to business activity. The employment promotion measures are closely linked with implementation of the Joint Assessment of Employment Priorities in Latvia signed by Latvia and the European Commission and the Development Plan for 2004-2006. The funding perspective of activities included in the National Employment Plan is linked with the European Social Fund (ESF), which is the main EU financial instrument for development of human resources and perfection of functioning of the labour market.
• Rate of pay increases:
  1. Compared with the 1st quarter of 2003, consumer prices in the 1st quarter of 2004 increased by 4.3%. Compared with the 1st quarter of 2003, the increase in the monthly net wage in the country in the 1st quarter of 2004 was 9,6%. Net wage in this period in the public sector increased by 6.3% (9.5% in the budget-financed institutions and 2.9% in enterprises and businesses with central and local government capital participation 50% and over (hereafter central and local government enterprises). Gross wage in the country increased by 10.8% (7.1% in the public sector, 10.6% in the budget-financed institutions and 3.3% in central and local government enterprises).
     In the private sector, the average monthly net wage of employees in the 1st quarter of 2004 increased by 12.6% compared with the 1st quarter 2003 (14.1% for gross wage).
  2. Compared with the 4th quarter of 2003, consumer prices in the 1st quarter of 2004 rose by 2.3%: 4.7% for food products (incl. alcoholic beverages and tobacco), 0.7% for non-food goods and 1.5% for services.
     Compared with the 4th quarter of 2003, the average monthly net wage decreased on average by 5.2% nationally in the 1st quarter 2004, of which by 11.7% in the public sector (by 13.5% in budget-financed institutions and by 8.8% in central and local government enterprises).
     Gross wage decreased by 4.6% nationally, of which by 11.5% in the pubic sector, 13.4% in budget-financed institutions and by 8.4% in central and local government enterprises.
     In the private sector, the average monthly net wage of employees in the 1st quarter of 2004 increased by 0.3% compared with the IV quarter 2003 (gross wage by 1.3%).

HR issues

• New employment legislation: From 1st May 2004
• New government initiatives: The further prospects of funding measures of the National Employment Plan are mostly linked with the European Social Fund (ESF), which is the main EU financial instrument for development of human resources and perfection of functioning of the labour market.
• Trends to notice: The priorities in the area of human resources to ensure a more efficient use of the ESF intervention measures in Latvia in the programming period of 2004-2006 are:
  • formation of the information society, involvement of all members of the society in efficient use of information and communication technologies;
  • creation of a balanced and modern educational system, matching the demands of the labour market;
  • support to integrated development of leading and most advanced branches and the related areas;
  • assistance for diversification of employment and increase of competitiveness in rural areas;
  • support to qualification upgrading, retraining and consulting of starting businesses and SME staff.

Taxation and social insurance law

• Social security contribution:
  • Employer payment: 24,09 %, for pensioner 19,73, for disabled person 22,08 %;
  • Employee payment: 9 %, pensioner 7,36 %, disabled person 8,24 %;
• Tax rate:
  • VAT: 18 % generally (for some goods and services 5 %);
  • Company incoming tax: 15%;
  • Population incoming tax: 25 %