Well-being¹ Poverty rate Share of population reporting good health, difference between rich and poor

ASSESSMENT AND RECOMMENDATIONS OECD ECONOMIC SURVEYS: LATVIA © OECD 2017 16 residential investment, but has recovered recently. Residential investment also fell because restrictions on residence permits for non-EU citizens were introduced in 2014. Exports to Russia were subdued reflecting the economic crisis there. As in other Baltic economies, exporters gained market shares Figure 6. The unemployment rate has fallen but remains high Figure 5, Panel B. Consumer price inflation remains low. Latvian exports have diversified, contributing to gains in market shares. Latvia has increased exports to new markets to compensate for the drop in exports due to Russia’s economic downturn and its ban on EU food product imports. The share of exports going to Russia remains the third largest after Lithuania and Estonia Figure 7. Machinery as well as information and communication technology ICT and travel service exports have gained Figure 2. Housing, health and income are weak and poverty is high 1. Each well-being dimension is measured by one to four indicators from the OECD Better Life Index database. Normalised indicators are averaged with equal weights. Indicators are normalised to range between 1 best and 0 according to the following formula: indicator value – minimum valuemaximum value – minimum value. “Civic engagement and governance” includes two indicators: stakeholder engagement for developing regulations and voter turnout. The former indicator for Latvia is a population-weighted OECD average due to lack of data. 2. The poverty line is half of median household income. Household income is adjusted to take into account household size. 3. Unweighted average. Source: OECD 2017, OECD Better Life Index – Edition 2016 and OECD Social and Welfare Statistics database. 1 2 http:dx.doi.org10.1787888933582322 0.0 0.2 0.4 0.6 0.8 1.0 Income and wealth Jobs and earnings Housing Work and life balance Health status Education and skills Social connections Environmental quality Personal security Subjective well- being

A. Well-being¹

Latvia OECD 3 6 9 12 15 18 3 6 9 12 15 18 CZ E F IN NO R LU X S V K A U T B E L IR L S V N G B R O ECD ³ P R T IT A G RC E S P E S T LT U LV A

B. Poverty rate

Share of population with disposable income below the poverty line², 2015 or latest year 10 20 30 40 50 10 20 30 40 50 NZ L IS R E S P G RC IT A K O R F R A DN K T U R IS L LU X NO R S V K P O L O ECD ³ HU N IR L S V N S W E NL D CH L P R T G B R US A A U T F IN DE U B E L CZ E LV A E S T pts pts

C. Share of population reporting good health, difference between rich and poor

15 years old and over, 2015 Civic engagement and governance 8 ©OECD ASSESSMENT AND RECOMMENDATIONS OECD ECONOMIC SURVEYS: LATVIA © OECD 2017 17 ground Figure 8. Nonetheless, Latvia’s goods exports still largely consists of raw materials and natural-resource-intensive products. Demand of these tends to grow little with rising incomes. In the medium-term the transit of exports from Russia is expected to continue declining but still contributes substantially to service export revenues. Reflecting strong wage growth, Latvia’s relative unit labour costs have increased since 2010, more so than in the other Baltic countries Figure 9, which have gained more export market share. However, wage growth may have been overstated as underreporting of wages to tax authorities diminished. Also, Latvian export market shares have improved markedly since 2014. The depreciation of the Euro and the appreciation of the Ruble reversed the trend in late 2016 but may only have a temporary impact. Since Latvia’s exports are concentrated on industries and activities with relatively small room for quality Figure 3. Income inequality is high Gini coefficient and gap of household disposable income between rich and poor, 2015 or latest year 1. It ranges from 0 when everybody has identical incomes to 1 when all income goes to only one person. 2. The ratio of 10 of people with highest income to 10 of people with lowest income. 3. Unweighted average of the data shown. Source: OECD 2017, OECD Social and Welfare Statistics database. 1 2 http:dx.doi.org10.1787888933582341 0.0 0.1 0.2 0.3 0.4 0.5 0.0 0.1 0.2 0.3 0.4 0.5 IS L S V K S V N DN K CZ E NO R F IN B E L A U T S W E LU X HU N DE U K O R F R A CH E IR L P O L NL D CA N O ECD ³ IT A JP N A U S P R T G RC E S P E S T NZ L LV A IS R G B R US A T U R CH L M E X

A. Gini coefficient¹