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LATVIA
Economy

Cities in LATVIA

Riga

Economy

Latvia's economy has undergone a major transformation, which is now bearing fruit. The state-controlled economy, driven from Moscow, has been replaced by an independent, free and (world) market-oriented state economy. The initially raging inflation is now somewhat under control; the gross national product (GNP) per capita already reached $2,290 in 1994 and is now (2017) $27,700. The distribution of working people among the population is as follows: 68.1% of the population works in services, 7.7% in agriculture and 24.1% in industry. (2017) The unemployment rate in 2017 was 8.7%. A clear growth sector is construction. Despite these positive developments, it should not be forgotten that Latvia is still relatively poor and suffers from very high unemployment in rural areas and in eastern Latvia (up to around 25%).

Currently, Latvia has about 2.5 million hectares of agricultural land, two-thirds of which is arable land and the rest is pasture land. The number of hectares is considerably lower than in 1935 (-32%). Under Soviet rule, more than 1 million ha of farmland was converted to forestry. Farmers were only allowed to cultivate a small area for themselves and keep some cattle. The farmers earned their wages on the gigantic state farms and kolkhozes. Kolchozes were collective farms, where the land was state-owned and the tools and harvest belonged to the members of the kolkhoz. At the time of independence, there were 400 kolkhoz farms with an average size of about 6000 ha and 200 state farms of about 7300 ha. Nevertheless, the revenues from the small pieces of private land played an important role in supplementing the very inefficiently producing state-owned enterprises and kolkhoz. In 1991, for example, 87% of all sheep and goats were raised on the small private plots. From 1940 to 1990, it was one of the main suppliers of meat and meat products to the Soviet Union. In return, they often received agricultural machinery, fuel, fodder grain and artificial fertiliser. When the centralised Soviet system collapsed, there was an immediate shortage of food for the animals and the costs rose enormously. In one year, the number of animals on state farms fell by 23%. As a result, the production of meat and milk products fell by 6-7%.

More than 2.5 million hectares are used for agriculture, two-thirds of them for arable farming, the rest for pasture. The main crops grown are cereals and fodder. Fishing is not only done off the coast, but also in Canadian waters.

Forestry is an important economic factor: 42% of the country is forested and more than 8 million m3 of wood are harvested annually. In terms of soil resources, Latvia has only peat, building materials (limestone, sand, loam, gypsum, gravel), wood and some amber.

After the Second World War, industry replaced agriculture as the main sector of the Latvian economy. Many people work in the construction industry and in the textile industry. Other important industrial sectors are the food, wood, paper and chemical industries. Latvia is the most industrialised of the Baltic States. For example, all electric and diesel trains for the entire Soviet Union were made in Latvia. Due to a severe lack of natural resources, it is highly dependent on exports of fuels, electricity and raw materials for industry. The natural resources are dolomite, limestone, clay, gravel and sand. The industry, concentrated around the cities of Riga, Liepaja and Daugavpils, mainly produces electrical machinery and equipment, foodstuffs and automobiles.n.

Although the country has three hydroelectric and two thermal power stations, a large part of its energy needs must be imported.

The trade balance is negative; one fifth of imports consist of mineral fuels. Furthermore, a lot of machinery and chemicals are imported. In 2017, imports amounted to $15.8 billion. The main import partners are Lithuania, Germany, Russia, and Estonia.

Exports are mainly wood and wood products, textiles, agricultural products and electronics. The main export partners are Lithuania, Germany, England, Russia, and Sweden. In 2017, exports amounted to $12.8 billion.

The railway network is 2412 km long, the road network 59,178 km, of which 22,843 km are paved. Riga is the largest container port in the Baltic, Ventspils comes second. There are plans to turn the former Soviet naval base of Liepaja into a merchant port. Riga has an international airport.


Sources

Baister, S. / Latvia
Bradt Publications

Estonia, Latvia and Lithuania : country studies
Federal Research Division, Library of Congress,

Williams, N. / Estonia, Latvia & Lithuania
Lonely Planet

CIA - World Factbook

BBC - Country Profiles

Last updated May 2024
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