Experts dream of a breakthrough
The authors of the report are not just positive, but very positive – apparently, they decided that we are not threatened by any local or, let alone, global crises, and if they are, it will not be too strong. And although the geopolitical situation appears among the factors influencing the development of the Latvian economy, experts nevertheless believe that this will not stop our country’s movement towards a better life.
The main goal of economic development is GDP growth in actual prices. To be fair, we note that gradually, year following year, the country’s GDP is still growing. So, if in 2005 the GDP in actual prices was only 14 billion, then in 2010 it was already 18 billion, and five years later the GDP was already at the level of 25 billion. In 2020, GDP reached 30 billion, and last year it was 40.3 billion.
The Ministry of Economy is very optimistic and believes that by the end of next year the GDP will be 44 billion, and in 2030 – 62 billion. And finally, in 2035 the GDP should be at 83 billion. It turns out that in 5 years – from 2030 to 2035 – GDP should grow by a record 21 billion! Is this possible? Probably yes, but provided that another economic crisis does not occur and that economic growth will be at least 2-2.5 percent per year.
According to the report of the Ministry of Economy, by 2027 the average take-home salary should reach 2,000 euros, and by 2035 it should exceed 3,200 net euros!
All hope for export
The Latvian economic growth model will be based on increased export income. This should be facilitated by three factors: 1) the development of human capital (read – qualified personnel), 2) the influx of investment (this is still bad) and 3) the growth of labor productivity (there are also a lot of problems here).
Provided, as the report states, reducing bureaucracy, increasing the efficiency of public administration and using modern digital technologies.
It is clear that forecasts for such a distant period – for 2035 – look populist. On the other hand, a goal is indicated to which one must strive. It is obvious that the ultimate goal of all these economic efforts is to create a prosperous society and improve the overall standard of living.
But let us return, in fact, to those prerequisites that allow us to make such rosy forecasts. The Ministry of Economy reminds that, firstly, until 2027, Latvia can still use funds from the so-called pandemic fund (economic recovery and sustainability fund) in the amount of 2.1 billion euros. In addition, Latvia will be able to use a total of 10 billion euros as European funds by 2027.
Although labor productivity (productivity) in Latvia is inferior to the vast majority of EU countries, nevertheless, our enterprises in a number of industries are already demonstrating productivity that is higher than the EU average. In particular, these are companies operating in agricultural processing, forestry, and transport… But there is a problem here too – the main workforce is concentrated in companies with low or medium productivity.
The classic question: what to do?
What needs to be done to make the economy and labor productivity grow faster? The Ministry of Economy speaks of the need to improve the quality of training of specialists, improve the retraining system, and more efficiently use the workforce. We would like to add that at the current birth rate and taking into account the current demographic situation, it is unlikely that Latvia will be able to manage only with internal human resources, that is, without attracting foreign workers and specialists. In order for people to be able to work effectively at least until they reach retirement age, better healthcare is needed.
It is difficult to disagree with the conclusions of experts from the Ministry of Economy regarding the need to attract finance to create innovative products and to develop digital technologies. Uniform development of regions and creation of jobs in the province is also part of the country’s economic development.
For investments to come to the provinces, we need good roads, other modern infrastructure, a flexible tax system, effective lending…
Taking into account the development of technologies, the Ministry of Economy proposes to pay special attention to the training of specialists to work in the field of artificial intelligence development. And in order for universities to be able to prepare such specialists, the educational foundation needs to be laid, of course, already at school, which means improving the quality of teaching natural disciplines (physics, mathematics, chemistry, biology, computer knowledge).
In general, much, much more will need to be done if we want Latvia to become a successful country where people would be eager to come for permanent residence, and not, as now, eager to emigrate.
Everything will happen, but not now
For now, the reality is different – we continue to lag significantly behind Estonia and Lithuania in a number of economic indicators. And in general, in terms of economic development, we are still… third from the bottom.
Apparently, this is why the Ministry of Economy focused on 2035, understanding that miracles do not happen and it is unlikely that we will make a breakthrough in a short period of time – for example, by 2027 or 2028. There should be no illusions on this score!
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2024-05-06 23:14:18
