Economic trends
Since its independence from the former Soviet Union, Latvia has implemented market-oriented reforms. The IMF noted that in recent years, Latvia's economic performance has been amongst the best of the EU member countries. This good performance is due to continuous growth of domestic consumption and the contribution of foreign investment. In addition, Lativa became a member of the EU on May 1st, 2004 and now benefits from European subsidies: euro 1.8 billion was granted between 2004 and 2008. Latvia also has a well-trained, inexpensive workforce.
However, the country has suffered severely from the effects of the 2008-2009 financial crisis, which put the economy and the country's social fabric in jeopardy. In January 2009, riots broke out in the country. Given the size of the crisis, the country had to ask the International Monetary Fund and the European Union for assistance. An emergency loan of euro 7 billion was granted to it. The country's second bank was also nationalised. The Latvian economy's main weaknesses are the relatively high trade deficit, the extent of the foreign debt and the current account deficit, which is at more than euro 3.5 billion. Latvia's gross foreign debt has been raising sharply since 2001 and represents more than 100% of the GDP. The rate of inflation has also increased in the last few years at 17.5%.
Main branches of industry
The agricultural sector contributes about 4% to the GDP and employs more than 15% of the population. It is dominated by cattle breeding, in addition to the production of grain, sugar beets, potatoes and vegetables. Apart from timber, which is largely exported, Latvia has almost no natural resources. The country has to import all its energy products, mainly from Russia.
The industrial sector contributes about 20% to the GDP and employs about 40% of the workforce. The construction, metallurgy, food-processing, and mechanical engineering sectors are booming.
The Latvian economy is driven by the services sector which contributes nearly three-fourths to the GDP.
International trade
The Latvian market is open and competitive. The EU is its largest trade partner. The foreign trade share in the country’s GDP is around 80%. The three main export partners of Latvia are Lithuania, Estonia, and Germany. These countries are reinforcing their positions on the Latvian market. The country exports mainly wood, coal, mineral fuels, oil, iron, steel, machinery, electrical and electronic equipment.
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