Last updated: September 15, 2026
Latvia’s economic growth has staged a notable recovery. Real GDP growth year-on-year accelerated from 0.2% in Q3 2024 to 2.97% in Q2 2026. Despite this improving momentum, the economy continues to operate with spare capacity, as illustrated by an output gap projected at -1.46% of potential GDP in 2027, following a negative gap of -1.6% in 2026 and -1.58% in 2025. Meanwhile, the labor market has experienced a slight softening, with the unemployment rate moving from 6.9% in December 2025 to a peak of 7.3% in July 2026.
Price pressures have fluctuated visibly over the past year. CPI inflation stood at 3.49% in December 2025, dipped to 2.38% by February 2026, and registered 2.61% in July 2026. Monetary policy for Latvia is determined by the European Central Bank (ECB), which sets rates for the whole euro area, not Latvia alone. Data on the ECB policy rate is not available.
Public finances reflect ongoing fiscal deficits. Government revenue reached 4.88 billions of national currency in Q3 2025, compared with expenditure of 5.15 billions of national currency in the same period. The government budget balance, measured as net lending/borrowing, registered between -2.02% of GDP in Q2 2024 and -2.29% of GDP in Q1 2026, hitting a low of -2.61% of GDP in Q3 2025. Debt sustainability figures diverge depending on the perimeter of measurement: official government debt stood at 58.33% of GDP in Q1 2026, whereas the broader measure of total financial liabilities of the general government reached 79.72% of GDP in the same quarter, reflecting different measurement perimeters rather than a direct discrepancy in reporting.
No sector balance data is available for Latvia. However, looking at the household sector's balance-sheet components, liquid deposits grew from 11.83 billions of national currency in Q2 2024 to 13.76 billions of national currency in Q1 2026, while long-term loans (mostly mortgages) expanded from 6.92 billions of national currency to 8.21 billions of national currency over the same interval. Sustained growth in household liabilities warrants attention as a potential point of watchfulness for financial stability.
In foreign trade, Latvia consistently runs a merchandise trade deficit. Goods exports to the world moved from 16,304.79 millions of national currency in 2020 to 22,418.73 millions of national currency in 2025, while goods imports from the world grew from 18,140.57 millions of national currency to 26,520.89 millions of national currency over the same timeframe.
Energy vulnerability remains a relevant factor for the economy. Net electricity imports stood at 1.07 billion kWh in 2024, a volume that is marginal relative to the broader size of this economy. Dry natural gas imports registered 29.8 billion cubic feet in 2024, highlighting a structural import dependence. This exposure is compounded by external price volatility: the European natural gas price climbed from $9.46 in December 2025 to $17.93 in July 2026, while the Brent crude oil price moved from $61.81 per barrel to $83.73 per barrel over the same months, acting as a general input cost pressure.
The currency's exchange rate against the IMF Special Drawing Right (SDR) basket edged from 1.19 units of currency per 1 SDR in August 2025 to 1.18 units of currency per 1 SDR in September 2026, indicating a slight overall strengthening of the currency that could marginally temper imported inflation while exerting pressure on export competitiveness.
Overall, Latvia’s economy demonstrates strengthening growth and expanding household buffers alongside persistent fiscal deficits and external energy cost pressures. While spare capacity remains, climbing import bills and rising household debt levels require careful monitoring.
This bulletin is generated with AI assistance from the structured economic data collected across this site (national accounts, sector accounts, trade, energy and currency data). It is intended as an accessible summary, not investment advice — figures may be revised as underlying data sources are updated. For the detailed underlying series, see the Nation Account Data and Economic Data sections in the menu above.