After the collapse of the USSR and the implementation of significant reforms, the Latvian economy for some time quickly rose in all respects. In the 2000s, it’s about five to seven percent a year until 2008, when the crisis began. In 1990, the Latvian economy in GDP occupied the fortieth place in the world, and according to the results of 2007, it was in third place among the post-Soviet countries. Only Armenia and Azerbaijan were ahead of it.
Statistics
In 2006, per capita GDP was 12.6%, and in 2007 - 10.3%. In 1992, the currency was introduced - the Latvian ruble, and since 1993 it was gradually replaced by the Latvian lat. Restitution and privatization were carried out, as a result, the share of industry in the Latvian economy decreased to 12% (and in 1990 this share was 30%). Already in 2008, it was Latvia that became the leader of the European Union in terms of the number of poor people - twenty-six percent of the population lived below the poverty line. And finally, in 2009, GDP in the Latvian economy became the worst indicator of GDP dynamics in the world.
In general, the development of the Baltic countries from 1992 to 2007 was called a phenomenal success in the transition from transformation to growth and the creation of modern market institutions. However, now Western scientists from the economic sector are inclined to see only the residual actions of the Soviet inheritance in this growth - it was then and in the Baltic countries that industry and infrastructure were especially well developed, as well as ample human capital was accumulated. The economies of Estonia, Latvia, Lithuania grew only due to residual resources and only in the first few years. In 2010, Latvia’s GDP continued to fall, but in 2011 it rose by five and a half percent. After leaving the USSR, Latvia became a member of the World Trade Organization, and in 2004 joined the European Union. Use of the euro here began only in 2014.
International trade
The economy of Latvia after joining the EU keeps afloat thanks to exports. The main goods are metal in bars and iron, which is just over eight percent of the total production, followed by equipment and electric machines with six percent, four percent - lumber, three and a half - textiles and knitwear, pharmaceutical products - three percent, a little less for round timber and two and a half percent - for wooden products. These goods are exported to neighboring Russia, Lithuania and Estonia, as well as a little to Germany, Sweden and Poland. But imports come to Latvia from a much larger number of countries.
In 2015, the external debt of the Ministry of Economy of Latvia amounted to 8.569 billion euros. In previous years, he fluctuated very slightly. A little earlier - in 2000 - the share of total Latvian external debt amounted to more than sixty percent of its GDP, and in 2007 it jumped to one hundred and thirty percent of the country's GDP. In 2009, debt amounted to more than one hundred and eighty percent. What is this talking about? How does the Latvian economy work? Mostly like a bankrupt.
Structure
The priority is given to the service sector in the sectoral structure of the Latvian economy - almost seventy percent of the GDP comes from there. Five percent come from forestry and agriculture, twenty-six percent come from industry. Until 2003 (that is, before joining the EU), Latvian industrial production grew slightly - by about five percent per year, and despite the fact that for the development of, for example, energy, the country's own resources are extremely small (Riga TPP No. 1 uses local peat, the rest of the industry need imported raw materials).
Experts estimate the oil reserves on the shelf of the Baltic Sea at thirty million tons, not too much for successful production. Rivers, too, because of their flat nature, do not have a large hydropotential. Latvia produces only 3.3 billion kilowatt-hours of electricity, and it consumes 5.2 billion. Hydroelectric power plants produce 67% of it, the rest are thermal plants, for which it is necessary to purchase fuel. Electricity is mainly imported from Russia and some from Estonia and Lithuania.
Wood and Textiles
Almost all woodworking is exported. The Ministry of Economy of Latvia considers the main enterprises to be plywood producers in Kuldiga, Daugavpils, Liepaja, Riga, as well as paper producers in Ogre and Jurmala. A lot of artisanal woodworking, small entrepreneurs are ubiquitous both in cities and in rural areas. They serve mainly tourists, making various souvenirs for them. But the textile industry is much more developed. It is supported by approximately sixty large and well-known companies, some of which have up to thirty million dollars in annual turnover. Their products can compete quite easily with similar products in Sweden, Germany and England. It should be noted that almost all goods from Latvia are sold abroad not under their own brands, but by partner companies.
Textile production is oriented only to export, leaving less than seven percent of production in Latvia. For example, in 2002, a variety of textiles worth three hundred and fifty million dollars were sold abroad. As a member of the EU, Latvia is forced to introduce from three to seventeen percent of import duties on all imports from third countries, as well as raw materials for the textile industry. And raw materials are purchased almost completely, including semi-finished products - in Uzbekistan, Belarus, Ukraine and most of all - in Russia. As a result, finished products are much more expensive: both fabrics and clothes that Latvia produces. The country's economy has suffered significantly. Competitiveness is rapidly declining, and even from this industry, which has always been successful, the country has less and less benefits.
Food industry
Under Soviet rule, this industry has always flourished. The Minister of Economics of Latvia, a well-known chess grandmaster and politician Dana Reizniece-Ozola, who took the ministerial chair in 2016, believes that today's stagnation in the food industry should be overcome in every way. Indeed, only the only plant in Latvia is flourishing, where the famous Riga Balsam is produced. This alcohol today has a fairly steady sales, and the company is in the top three largest taxpayers.
The rest is much worse. Of the fifty-six dairy processing enterprises, only eight have certificates of conformity of European products from the veterinary service, which give the right to import dairy products into Europe. Fish catch and processing decreased three times, because European quality requires a radical modernization and reconstruction of almost all enterprises. Unless small producers are able to give an exclusive product.
Agriculture
Reforms and land privatization have led to a tangible reduction in the main cultivated area. And restitution has returned many land plots to people who are not at all interested in processing them or who have no opportunities for this. Arable land previously accounted for twenty-seven percent of the structure of the land fund, but now it has completely decreased. Meadows and pastures previously occupied thirteen percent, and the forest - about forty. Now grain and potato production has halved, the number of livestock, milk and meat, respectively, has decreased by twenty percent, that is, the sectors that held the basis of Latvian agriculture have almost died.
Livestock farming cannot even satisfy domestic needs today. Subsistence farming is not able to feed the people, farmers lack financial resources, they are poorly provided with fertilizers and agricultural machinery, and their experience in agribusiness is still small. And most importantly, in Europe, everything they produce is virtually uncompetitive.
Service sector: tourism
Latvia is rich in historical monuments. On its territory - about a hundred interesting castles and palaces. The resort area of the Riga Seaside strip is famous for its mineral waters (hydrogen sulfide) and healing mud. However, not everything is in order here. Earlier from tourists and vacationers in Latvia there was no end. And now there is a conclusion of European experts: as a recreation area, the Riga seaside cannot be used, since full-scale treatment works are needed. And therefore today such attractive in the past and exceptionally lively campsites, motels and beaches are empty and mostly idle.
The entire leisure infrastructure in Latvia was created during the Soviet era in the middle of the last century, which is why it is clear that without the contribution of many efforts and big finances, this system will become more and more degraded. This is an astounding figure: tourism in Latvia, a country that seems to be created for vacationers, accounts for only 2 percent of GDP. Under the USSR, nearly seven hundred thousand tourists visited the seaside every year, now they are exactly twenty times less. People come mainly from Belarus and Russia to rest, and quite a bit from Germany and Finland. Europe promises to help Latvia revive this industry, and the Latvian government already has a long-term plan for the development of tourism, but so far the figures in this country are the lowest in Europe.
Transport
The Latvian economy generates up to thirty percent of its income thanks to the leading industry - cargo transit. Loads are mainly Russian. This is twenty-seven percent of total exports of services and goods. Railway transport predominates (up to fifty percent of the cargo turnover), piping takes the second place with thirty percent, fourteen percent comes from water and seven percent by road. The paths run both from west to east, and from north to south.
The largest port in the eastern part of the Baltic Sea is Ventspils, it can receive any vessels and handle any cargo. Even tankers with a displacement of up to one hundred and twenty thousand tons come here. Port cargo turnover is forty million tons, a world-class export terminal. The port of Riga can handle up to ten million tons, and Russian companies through the container terminal provide up to eighty-five percent of transit cargo. Pipelines, of course, are also Russian. Latvia's own fleet has only fourteen vessels, their total displacement - less than sixty thousand tons.
How the Latvian economy worked
Now we can confidently state that the GDP indicators in the pre-crisis period were driven by the banal sale of state property to foreign investors, as well as EU subsidies and pumping loans. The first in this process were commercial banks: for the five years to 2008, almost without any control, many billions of euros were given out to the population of Latvia for housing construction, land purchase, European-quality repair of existing living space, for the purchase of expensive cars, televisions and washing machines. Loans were issued for up to forty years at one and a half to two percent per annum.
Thus began a life of borrowing. And then the cataclysms of the global crisis in the euro area weakened the country's solvency so much that Latvia was ahead of the rest in impoverishment of the population. EU statistics will not deceive: 38% of the inhabitants of Latvia after 2012 were below the poverty line. The able-bodied population was forced to travel abroad to earn money. The population of Latvia decreased by two percent per year. During the "Soviet occupation" it nevertheless increased sharply: there were 2.7 million people before 1945, and in 1985, already 3.7 million. Between 1991 and 2005, about twenty percent of the population was lost, and the crisis of 2008 exacerbated this process.
