Latvia 2017 OECD economic Survey boosting productivity and inclusiveness
2017 OECD ECONOMIC SURVEY
OF LATVIA
Boosting productivity and inclusiveness
September 15th 2017, Riga Latvia
http://www.oecd.org/eco/surveys/economic-survey-latvia.htm
Main messages
• The Latvian econom y is growing strongly, underpinned by
progress with econom ic reform s.
• Deeper integration into international trade is necessary to
catch up with high-incom e countries.
• Poverty and unem ploym ent are still high. Access to jobs,
housing and health services need to im prove.
1
Growth has been strong
Re al GD P, In d e x 2 0 0 7 = 10 0
110
110
Latvia
Estonia
Euro area
2017Q1
2016Q3
2016Q1
2015Q3
2015Q1
2014Q3
2014Q1
2013Q3
75
2013Q1
75
2012Q3
80
2012Q1
80
2011Q3
85
2011Q1
85
2010Q3
90
2010Q1
90
2009Q3
95
2009Q1
95
2008Q3
100
2008Q1
100
2007Q3
105
2007Q1
105
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database).
2
Exports have gained market share
Expo rt pe rfo rm an ce in d icato r, m o vin g ave rage 2 0 10 = 10 0
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database).
3
Unemployment has fallen
U n e m plo ym e n t rate as % o f labo u r fo rce
Latvia
24
Euro area
24
2017Q2
2017Q1
2016Q4
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
2013Q4
2013Q3
0
2013Q2
0
2013Q1
4
2012Q4
4
2012Q3
8
2012Q2
8
2012Q1
12
2011Q4
12
2011Q3
16
2011Q2
16
2011Q1
20
2010Q4
20
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database).
4
Wages have grown more than prices
Gro w th o f labo u r co m pe n s atio n pe r e m plo ye e an d co n s u m e r price in flatio n
%
%
12
12
Worker pay
Inflation
2017Q2
2017Q1
2016Q4
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
-4
2014Q2
-4
2014Q1
-2
2013Q4
-2
2013Q3
0
2013Q2
0
2013Q1
2
2012Q4
2
2012Q3
4
2012Q2
4
2012Q1
6
2011Q4
6
2011Q3
8
2011Q2
8
2011Q1
10
2010Q4
10
Source: OECD (2017), OECD Economic Outlook: Statistics and Projections (database).
5
Latvia is a top reformer
Th e 2 0 17 Go in g fo r Gro w th re fo rm re s po n s ive n e s s in d icato r
%
80
60
40
LVA
FRA
BRA
BEL
AUT
CHL
ISR
CHN
MEX
GRC
ITA
IRL
EST
CZE
NLD
DNK
DEU
IND
JPN
NOR
ESP
OECD
COL
USA
SWE
HUN
SVK
GBR
FIN
KOR
ZAF
NZL
CHE
PRT
POL
LUX
ISL
TUR
CAN
AUS
IDN
0
SVN
20
Source: OECD (20 17) Going for Growth 20 17 edition.
6
Debt has fallen
D e bt as % o f GD P
%
%
200
200
Households
Non-financial corporations
160
160
120
120
80
80
40
40
0
2010
2011
2012
2013
2014
0
2015
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database) and OECD National Accounts Statistics
(database).
7
Important challenges remain
8
The gap in productivity remains large
Gap in GD P p e r cap ita o f Latvia vis -à-vis th e u p p e r h alf o f OECD co u n trie s
%
-45
-50
-55
-60
-65
-70
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
-80
1995
-75
Source: OECD (20 17), OECD National Accounts Statistics (database) and OECD Productivity Statistics (database).
9
Poverty is high
Sh are o f p o p u latio n w ith d is p o s able in co m e be lo w th e p o ve rty lin e , 2 0 15 o r late s t
%
%
LVA
LTU
EST
ESP
GRC
0
ITA
0
PRT
3
OECD
3
GBR
6
SVN
6
IRL
9
BEL
9
AUT
12
SVK
12
LUX
15
NOR
15
FIN
18
CZE
18
Source: OECD (20 17), OECD Social and Welfare Statistics (database).
10
Income inequality remains high
Gin i co e fficie n t, s cale fro m 0 ( pe rfe ct e qu ality) to 1 ( pe rfe ct in e qu ality) , 2 0 15 o r late s t available
MEX
CHL
TUR
USA
GBR
ISR
LVA
NZL
EST
ESP
GRC
PRT
AUS
JPN
ITA
OECD
CAN
NLD
POL
IRL
CHE
FRA
KOR
DEU
HUN
0.0
LUX
0.0
SWE
0.1
AUT
0.1
BEL
0.2
FIN
0.2
NOR
0.3
CZE
0.3
DNK
0.4
SVN
0.4
SVK
0.5
ISL
0.5
Source: OECD (20 17), OECD Social and Welfare Statistics (database).
11
Higher income, better housing and better
health would raise wellbeing
OECD Better Life Index, from 0 (worse) to 1 (best), 2016
Latvia
OECD
Income and wealth
1.0
Jobs and earnings
Subjective well-being
0.8
0.6
Personal security
Housing
0.4
0.2
0.0
Work and life balance
Environmental quality
Civic engagement and
Health status
governance
Social connections
Education and skills
Source: OECD (20 16), OECD Better Life Index- Edition 20 16.
12
5
5
0
0
-5
-5
-10
-10
%
10
2017M3
2016M12
2016M9
2016M6
2016M3
2015M12
2015M9
2015M6
2015M3
2014M12
2014M9
2014M6
Households
2014M3
2013M12
2013M9
2013M6
2013M3
2012M12
2012M9
2012M6
2012M3
2011M12
2011M9
2011M6
2011M3
2010M12
2010M9
2010M6
2010M3
2009M12
2009M9
2009M6
2009M3
Credit growth is still weak
Ye ar-o n -ye ar p e rce n tage ch an ge o f cre d it s to ck
%
10
Non-financial corporations
Source: Bank of Latvia .
13
Seize opportunities in global markets to
catch up with high-income countries
14
Productivity growth has slowed
%
Ave rage an n u al gro w th o f labo u r p ro d u ctivity
%
10
10
8
8
6
6
4
4
2
2
0
1995-2005
2005-2016
Total
1995-2005
2005-2016
Manufacturing
1995-2005
2005-2016
Business sector services
0
Source: OECD (20 17), OECD Productivity Statistics (database).
15
Trade could boost productivity and income
D o m e s tic valu e ad d e d p e r w o rke r e m bo d ie d in fo re ign fin al d e m an d , 2 0 11
Source: OECD/ WTO (20 16), Statistics on Trade in Value Added (database) and OECD (20 16), "Trade in Em ploym ent:
Core Indicators" in OECD Structural Analysis (STAN) Databases.
16
Latvia must move up the value chain to
knowledge-intensive activities
Source: OECD (20 13), Interconnected Econom ies: Benefiting from Global Value Chains, OECD Publishing, Paris.
17
Many workers feel under-skilled at the time of
hiring
Sh are o f e m p lo ye e s re p o rtin g lo w e r s kill le ve l th an re qu ire d
fo r th e ir jo bs at th e tim e o f h irin g, 2 0 14
EST
LTU
LVA
SVK
CZE
FIN
IRL
DNK
PRT
FRA
GBR
POL
0
SWE
0
HUN
10
AUT
10
ITA
20
GRC
20
BEL
30
NLD
30
DEU
40
SVN
40
ESP
50
LUX
50
Source: CEDEFOP (20 16), “Skills Panoram a” (http:/ / skillspanoram a.cedefop.europa.eu).
18
Skill shortages are holding back participation
in global value chains
Sh are o f e m p lo ye e s re p o rtin g lo w e r s kill le ve l th an re qu ire d fo r th e ir cu rre n t jo bs , 2 0 14
%
%
Source: CEDEFOP (20 16), “Skills Panoram a” (http:/ / skillspanoram a.cedefop.europa.eu).
EST
LTU
LVA
FIN
CZE
SVK
IRL
SWE
GRC
HUN
POL
BEL
0
DNK
0
FRA
3
NLD
3
SVN
6
GBR
6
ESP
9
ITA
9
AUT
12
DEU
12
PRT
15
LUX
15
19
Few firms cooperate with research institutions
Th e s h are o f firm s e n gagin g in re s e arch co o p e ratio n
% of all product and/or process-innovating firms, 2012-14
%
AUT
FIN
SVN
BEL
ISL
NOR
EST
DEU
SWE
NLD
DNK
FRA
POL
0
SVK
0
CZE
5
HUN
5
LUX
10
GRC
10
CHE
15
PRT
15
LTU
20
LVA
20
ITA
25
%
25
Source: Eurostat (20 16), Com m unity Innovation Survey (CIS).
20
Low debt recovery hampers access to credit
Ave rage re co ve ry rate fro m in s o lve n cy , 2 0 16
%
100
80
80
60
60
40
40
20
20
0
0
TUR
CHL
GRC
EST
HUN
LUX
CHE
LVA
SVK
POL
ISR
ITA
CZE
MEX
OECD
PRT
SWE
ESP
FRA
USA
AUS
AUT
NZL
DEU
KOR
ISL
CAN
IRL
DNK
GBR
SVN
NLD
BEL
FIN
JPN
NOR
%
100
Source: World Bank (20 17), Doing Business 20 16: Measuring Regulatory Quality and Efficiency (Resolving insolvency database).
21
Infrastructure lags behind peer countries
Glo bal Co m p e titive n e s s In d e x, s cale fro m 1 to 7 ( be s t)
2016-17
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
Latvia
Estonia
Lithuania
Finland
0
Source: World Economic Forum, "The Global Competitiveness Report 2016-2017".
22
Recommendations to seize opportunities in global
markets to catch up with high-income countries
Pro vid e m o re ge n e ro u s gran ts fo r s tu d e n ts atte n d in g
vo catio n al s ch o o ls w h o are fro m lo w -in co m e fam ilie s .
Exp an d gran ts fo r u n ive rs ity s tu d e n ts an d targe t th e m to
s tu d e n ts fro m lo w -in co m e fam ilie s .
In cre as e go ve rn m e n t fu n d in g o f in n o vatio n p ro m o tio n
p ro gram m e s w ith s tro n g e valu atio n re s u lts .
Stre n gth e n th e s p e cialis atio n o f ju d ge s to im p ro ve th e
in s o lve n cy re gim e .
Ap p ly th e s am e co s t-be n e fit te s ts to large n atio n al
in fras tru ctu re p ro je cts as are ap p lie d to EU -fu n d e d
p ro je cts .
23
Improving access to jobs, housing, and
health services
24
Unemployment is high in some regions
U n e m p lo ym e n t as % o f th e labo u r fo rce , 2 0 16
%
%
20
20
16
16
12
12
8
8
4
4
0
Latvia
Pierīga
Riga
Vidzeme
Kurzeme
Zemgale
Latgale
0
Source: Central Statistical Bureau of Latvia.
25
High unemployment keeps poverty high
Sh are o f p o p u latio n w ith d is p o s able in co m e be lo w 6 0 % o f m e d ian h o u s e h o ld in co m e
%
%
45
45
36
36
27
27
18
18
9
9
0
Latvia
Riga
Pierīga
Kurzeme
Zemgale
Vidzeme
Latgale
0
Source: Central Statistical Bureau of Latvia.
26
Access to affordable rental housing is low
Sh are o f re n tal h o u s in g, lo w -in co m e h o u s e h o ld s , 2 0 14 o r late s t ye ar
%
80
%
80
Rent (private)¹
Rent (subsidized)²
DEU
NLD³
DNK³
SWE³
CHE
AUT
BEL
USA³
CAN³
FRA
LUX
FIN
GBR
KOR
ISL
AUS³
IRL
0
NOR
0
ESP
10
ITA
10
CZE
20
GRC
20
PRT
30
SVN
30
LVA
40
CHL³
40
HUN
50
SVK
50
EST
60
POL
60
MEX³
70
LTU
70
Source: OECD (20 16), OECD Affordable Housing Database.
27
Spending on active labour market policies is
low
Pu blic e xp e n d itu re , % o f GD P, 2 0 15 o r m o s t re ce n t
DNK
SWE
FRA
FIN
HUN
NLD
AUT
BEL
LUX
DEU
ESP
CHE
IRL
PRT
NOR
OECD
ITA
POL
CZE
KOR
NZL
0.0
LTU
0.0
SVN
0.4
CAN
0.4
GBR
0.8
AUS
0.8
SVK
1.2
EST
1.2
CHL
1.6
ISR
1.6
LVA
2.0
JPN
2.0
USA
2.4
MEX
2.4
Source: OECD (20 17), OECD Em ploym ent and Labour Market Statistics (database).
28
Out-of-pocket payments in healthcare are high
H o u s e h o ld o u t-o f-p o cke t e xp e n d itu re , % o f to tal cu rre n t e xp e n d itu re o n h e alth care , 2 0 15
Source: OECD (20 17), OECD Health Statistics (database)
LVA
MEX
KOR
GRC
CHL
HUN
CHE
PRT
ISR
ESP
POL
ITA
EST
OECD
FIN
SVK
AUT
BEL
ISL
TUR
SWE
IRL
GBR
0
CAN
0
NOR
10
DNK
10
CZE
20
JPN
20
DEU
30
SVN
30
NLD
40
USA
40
LUX
50
FRA
50
29
Workers pay high fees for private pensions
Op e ratin g co s ts o f th e p rivate p e n s io n s ys te m
% of assets under management, 2015
LVA
EST
CZE
ESP
SVN
SVK
TUR¹
GRC¹
AUS
POL
CHL¹
CHE
HUN
NZL¹
ISR
CAN
0.0
AUT
0.0
BEL
0.4
NOR
0.4
ISL
0.8
PRT
0.8
GBR¹
1.2
DEU
1.2
LUX
1.6
NLD
1.6
DNK
%
2.0
FIN
%
2.0
Source: OECD (20 17), OECD Pensions Statistics (database).
30
Recommendations to improve access to jobs,
housing, and health services
Exp an d th e m o bility p ro gram m e , w h ich p ro vid e s te m p o rary
s u p p o rt fo r re lo catio n an d tran s p o rt to u n e m p lo ye d m o vin g
to a jo b.
Pro vid e m o re fu n d in g fo r lo w -co s t re n te d h o u s in g in are as
o f e xp an d in g e m p lo ym e n t.
Im p ro ve le gal ce rtain ty in re n tal re gu latio n an d e n co u rage
o u t-o f-co u rt p ro ce d u re s .
Sim p lify th e ad m in is trative p ro ce s s fo r o btain in g a bu ild in g
p e rm it.
Pro m o te th e p ro vis io n o f ad u lt e d u catio n by vo catio n al
e d u catio n s ch o o ls .
Lo w e r o p e ratin g co s ts in th e co m p u ls o ry p rivate p e n s io n
s ys te m , fo r e xam p le by in tro d u cin g a lo w -co s t fu n d as th e
d e fau lt ch o ice .
Re d u ce h e alth care o u t-o f-p o cke t p aym e n ts e s p e cially fo r
th e lo w -in co m e p o p u latio n .
31
Using budget and tax policy to support
inclusive growth
32
Government debt is low
Ge n e ral go ve rn m e n t d e bt % o f GD P, 2 0 16
JPN
GRC
ITA
PRT
BEL
FRA
GBR
ESP
OECD
USA
AUT
CAN
SVN
HUN
IRL
DEU
FIN
NLD
POL
ISL
ISR
0
SVK
0
LTU
40
SWE
40
DNK
80
CZE
80
AUS
120
LVA
120
KOR
160
CHE
160
NOR
200
NZL
200
LUX
240
EST
240
Source: OECD Economic Outlook 101 database. National Accounts definition of government debt (not Maastricht).
33
Informality remains high
Es tim ate d s ize o f th e s h ad o w e co n o m y an d u n d e rre p o rte d co rp o rate p ro fits an d w age s , 2 0 16
Source: Putniņš, T. and A. Sauka (20 17), "Shadow Econom y Index for the Baltic Countries", Stockholm School of Econom ics in Riga.
34
Taxes on low wages are high
Taxatio n o f labo u r in co m e , 2 0 16
% of total labour compensation, single person at 67% of average earnings without children
%
50
%
50
after tax reform
40
30
30
20
20
10
10
0
0
CHL
NZL
ISR
MEX
KOR
CHE
IRL
AUS
GBR
CAN
USA
ISL
NLD
JPN
LUX
OECD
NOR
DNK
POL
TUR
ESP
GRC
PRT
EST
FIN
SVN
SVK
CZE
ITA
SWE
LVA
AUT
FRA
DEU
BEL
HUN
40
Tax re fo rm appro ve d in 2 0 17 w ill re d u ce taxe s o n pro fits an d w age s fro m 2 0 18 .
Source: OECD (20 17), OECD Tax Statistics (database) and OECD estim ate of tax reform effect.
35
Recommendations for budget and tax policy to
support inclusive growth
Rais e s p e n d in g to ad d re s s p re s s in g s tru ctu ral an d s o cial
p o licy p rio ritie s .
Make be tte r u s e o f in fo rm atio n an d co m m u n icatio n
te ch n o lo gy fo r tax law e n fo rce m e n t.
Stre n gth e n th e bu d ge tary in d e p e n d e n ce o f th e
Co rru p tio n Pre ve n tio n an d Co m batin g Bu re au ( KN AB) .
Re m o ve p o litical in flu e n ce in th e ap p o in tm e n t o f ju d ge s .
Re d u ce taxe s o n lo w w age s fu rth e r.
Rais e m o re re ve n u e s fro m th e taxatio n o f re al e s tate an d
e n e rgy.
Bro ad e n th e bas e o f bu s in e s s in co m e taxatio n by
re m o vin g tax e xe m p tio n s .
36
For more information
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without
prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers
and boundaries and to the name of any territory, city or area.
http://www.oecd.org/eco/surveys/economic-survey-latvia.htm
OECD Economics
OECD
37
OF LATVIA
Boosting productivity and inclusiveness
September 15th 2017, Riga Latvia
http://www.oecd.org/eco/surveys/economic-survey-latvia.htm
Main messages
• The Latvian econom y is growing strongly, underpinned by
progress with econom ic reform s.
• Deeper integration into international trade is necessary to
catch up with high-incom e countries.
• Poverty and unem ploym ent are still high. Access to jobs,
housing and health services need to im prove.
1
Growth has been strong
Re al GD P, In d e x 2 0 0 7 = 10 0
110
110
Latvia
Estonia
Euro area
2017Q1
2016Q3
2016Q1
2015Q3
2015Q1
2014Q3
2014Q1
2013Q3
75
2013Q1
75
2012Q3
80
2012Q1
80
2011Q3
85
2011Q1
85
2010Q3
90
2010Q1
90
2009Q3
95
2009Q1
95
2008Q3
100
2008Q1
100
2007Q3
105
2007Q1
105
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database).
2
Exports have gained market share
Expo rt pe rfo rm an ce in d icato r, m o vin g ave rage 2 0 10 = 10 0
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database).
3
Unemployment has fallen
U n e m plo ym e n t rate as % o f labo u r fo rce
Latvia
24
Euro area
24
2017Q2
2017Q1
2016Q4
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
2013Q4
2013Q3
0
2013Q2
0
2013Q1
4
2012Q4
4
2012Q3
8
2012Q2
8
2012Q1
12
2011Q4
12
2011Q3
16
2011Q2
16
2011Q1
20
2010Q4
20
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database).
4
Wages have grown more than prices
Gro w th o f labo u r co m pe n s atio n pe r e m plo ye e an d co n s u m e r price in flatio n
%
%
12
12
Worker pay
Inflation
2017Q2
2017Q1
2016Q4
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
-4
2014Q2
-4
2014Q1
-2
2013Q4
-2
2013Q3
0
2013Q2
0
2013Q1
2
2012Q4
2
2012Q3
4
2012Q2
4
2012Q1
6
2011Q4
6
2011Q3
8
2011Q2
8
2011Q1
10
2010Q4
10
Source: OECD (2017), OECD Economic Outlook: Statistics and Projections (database).
5
Latvia is a top reformer
Th e 2 0 17 Go in g fo r Gro w th re fo rm re s po n s ive n e s s in d icato r
%
80
60
40
LVA
FRA
BRA
BEL
AUT
CHL
ISR
CHN
MEX
GRC
ITA
IRL
EST
CZE
NLD
DNK
DEU
IND
JPN
NOR
ESP
OECD
COL
USA
SWE
HUN
SVK
GBR
FIN
KOR
ZAF
NZL
CHE
PRT
POL
LUX
ISL
TUR
CAN
AUS
IDN
0
SVN
20
Source: OECD (20 17) Going for Growth 20 17 edition.
6
Debt has fallen
D e bt as % o f GD P
%
%
200
200
Households
Non-financial corporations
160
160
120
120
80
80
40
40
0
2010
2011
2012
2013
2014
0
2015
Source: OECD (20 17), OECD Econom ic Outlook: Statistics and Projections (database) and OECD National Accounts Statistics
(database).
7
Important challenges remain
8
The gap in productivity remains large
Gap in GD P p e r cap ita o f Latvia vis -à-vis th e u p p e r h alf o f OECD co u n trie s
%
-45
-50
-55
-60
-65
-70
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
-80
1995
-75
Source: OECD (20 17), OECD National Accounts Statistics (database) and OECD Productivity Statistics (database).
9
Poverty is high
Sh are o f p o p u latio n w ith d is p o s able in co m e be lo w th e p o ve rty lin e , 2 0 15 o r late s t
%
%
LVA
LTU
EST
ESP
GRC
0
ITA
0
PRT
3
OECD
3
GBR
6
SVN
6
IRL
9
BEL
9
AUT
12
SVK
12
LUX
15
NOR
15
FIN
18
CZE
18
Source: OECD (20 17), OECD Social and Welfare Statistics (database).
10
Income inequality remains high
Gin i co e fficie n t, s cale fro m 0 ( pe rfe ct e qu ality) to 1 ( pe rfe ct in e qu ality) , 2 0 15 o r late s t available
MEX
CHL
TUR
USA
GBR
ISR
LVA
NZL
EST
ESP
GRC
PRT
AUS
JPN
ITA
OECD
CAN
NLD
POL
IRL
CHE
FRA
KOR
DEU
HUN
0.0
LUX
0.0
SWE
0.1
AUT
0.1
BEL
0.2
FIN
0.2
NOR
0.3
CZE
0.3
DNK
0.4
SVN
0.4
SVK
0.5
ISL
0.5
Source: OECD (20 17), OECD Social and Welfare Statistics (database).
11
Higher income, better housing and better
health would raise wellbeing
OECD Better Life Index, from 0 (worse) to 1 (best), 2016
Latvia
OECD
Income and wealth
1.0
Jobs and earnings
Subjective well-being
0.8
0.6
Personal security
Housing
0.4
0.2
0.0
Work and life balance
Environmental quality
Civic engagement and
Health status
governance
Social connections
Education and skills
Source: OECD (20 16), OECD Better Life Index- Edition 20 16.
12
5
5
0
0
-5
-5
-10
-10
%
10
2017M3
2016M12
2016M9
2016M6
2016M3
2015M12
2015M9
2015M6
2015M3
2014M12
2014M9
2014M6
Households
2014M3
2013M12
2013M9
2013M6
2013M3
2012M12
2012M9
2012M6
2012M3
2011M12
2011M9
2011M6
2011M3
2010M12
2010M9
2010M6
2010M3
2009M12
2009M9
2009M6
2009M3
Credit growth is still weak
Ye ar-o n -ye ar p e rce n tage ch an ge o f cre d it s to ck
%
10
Non-financial corporations
Source: Bank of Latvia .
13
Seize opportunities in global markets to
catch up with high-income countries
14
Productivity growth has slowed
%
Ave rage an n u al gro w th o f labo u r p ro d u ctivity
%
10
10
8
8
6
6
4
4
2
2
0
1995-2005
2005-2016
Total
1995-2005
2005-2016
Manufacturing
1995-2005
2005-2016
Business sector services
0
Source: OECD (20 17), OECD Productivity Statistics (database).
15
Trade could boost productivity and income
D o m e s tic valu e ad d e d p e r w o rke r e m bo d ie d in fo re ign fin al d e m an d , 2 0 11
Source: OECD/ WTO (20 16), Statistics on Trade in Value Added (database) and OECD (20 16), "Trade in Em ploym ent:
Core Indicators" in OECD Structural Analysis (STAN) Databases.
16
Latvia must move up the value chain to
knowledge-intensive activities
Source: OECD (20 13), Interconnected Econom ies: Benefiting from Global Value Chains, OECD Publishing, Paris.
17
Many workers feel under-skilled at the time of
hiring
Sh are o f e m p lo ye e s re p o rtin g lo w e r s kill le ve l th an re qu ire d
fo r th e ir jo bs at th e tim e o f h irin g, 2 0 14
EST
LTU
LVA
SVK
CZE
FIN
IRL
DNK
PRT
FRA
GBR
POL
0
SWE
0
HUN
10
AUT
10
ITA
20
GRC
20
BEL
30
NLD
30
DEU
40
SVN
40
ESP
50
LUX
50
Source: CEDEFOP (20 16), “Skills Panoram a” (http:/ / skillspanoram a.cedefop.europa.eu).
18
Skill shortages are holding back participation
in global value chains
Sh are o f e m p lo ye e s re p o rtin g lo w e r s kill le ve l th an re qu ire d fo r th e ir cu rre n t jo bs , 2 0 14
%
%
Source: CEDEFOP (20 16), “Skills Panoram a” (http:/ / skillspanoram a.cedefop.europa.eu).
EST
LTU
LVA
FIN
CZE
SVK
IRL
SWE
GRC
HUN
POL
BEL
0
DNK
0
FRA
3
NLD
3
SVN
6
GBR
6
ESP
9
ITA
9
AUT
12
DEU
12
PRT
15
LUX
15
19
Few firms cooperate with research institutions
Th e s h are o f firm s e n gagin g in re s e arch co o p e ratio n
% of all product and/or process-innovating firms, 2012-14
%
AUT
FIN
SVN
BEL
ISL
NOR
EST
DEU
SWE
NLD
DNK
FRA
POL
0
SVK
0
CZE
5
HUN
5
LUX
10
GRC
10
CHE
15
PRT
15
LTU
20
LVA
20
ITA
25
%
25
Source: Eurostat (20 16), Com m unity Innovation Survey (CIS).
20
Low debt recovery hampers access to credit
Ave rage re co ve ry rate fro m in s o lve n cy , 2 0 16
%
100
80
80
60
60
40
40
20
20
0
0
TUR
CHL
GRC
EST
HUN
LUX
CHE
LVA
SVK
POL
ISR
ITA
CZE
MEX
OECD
PRT
SWE
ESP
FRA
USA
AUS
AUT
NZL
DEU
KOR
ISL
CAN
IRL
DNK
GBR
SVN
NLD
BEL
FIN
JPN
NOR
%
100
Source: World Bank (20 17), Doing Business 20 16: Measuring Regulatory Quality and Efficiency (Resolving insolvency database).
21
Infrastructure lags behind peer countries
Glo bal Co m p e titive n e s s In d e x, s cale fro m 1 to 7 ( be s t)
2016-17
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
Latvia
Estonia
Lithuania
Finland
0
Source: World Economic Forum, "The Global Competitiveness Report 2016-2017".
22
Recommendations to seize opportunities in global
markets to catch up with high-income countries
Pro vid e m o re ge n e ro u s gran ts fo r s tu d e n ts atte n d in g
vo catio n al s ch o o ls w h o are fro m lo w -in co m e fam ilie s .
Exp an d gran ts fo r u n ive rs ity s tu d e n ts an d targe t th e m to
s tu d e n ts fro m lo w -in co m e fam ilie s .
In cre as e go ve rn m e n t fu n d in g o f in n o vatio n p ro m o tio n
p ro gram m e s w ith s tro n g e valu atio n re s u lts .
Stre n gth e n th e s p e cialis atio n o f ju d ge s to im p ro ve th e
in s o lve n cy re gim e .
Ap p ly th e s am e co s t-be n e fit te s ts to large n atio n al
in fras tru ctu re p ro je cts as are ap p lie d to EU -fu n d e d
p ro je cts .
23
Improving access to jobs, housing, and
health services
24
Unemployment is high in some regions
U n e m p lo ym e n t as % o f th e labo u r fo rce , 2 0 16
%
%
20
20
16
16
12
12
8
8
4
4
0
Latvia
Pierīga
Riga
Vidzeme
Kurzeme
Zemgale
Latgale
0
Source: Central Statistical Bureau of Latvia.
25
High unemployment keeps poverty high
Sh are o f p o p u latio n w ith d is p o s able in co m e be lo w 6 0 % o f m e d ian h o u s e h o ld in co m e
%
%
45
45
36
36
27
27
18
18
9
9
0
Latvia
Riga
Pierīga
Kurzeme
Zemgale
Vidzeme
Latgale
0
Source: Central Statistical Bureau of Latvia.
26
Access to affordable rental housing is low
Sh are o f re n tal h o u s in g, lo w -in co m e h o u s e h o ld s , 2 0 14 o r late s t ye ar
%
80
%
80
Rent (private)¹
Rent (subsidized)²
DEU
NLD³
DNK³
SWE³
CHE
AUT
BEL
USA³
CAN³
FRA
LUX
FIN
GBR
KOR
ISL
AUS³
IRL
0
NOR
0
ESP
10
ITA
10
CZE
20
GRC
20
PRT
30
SVN
30
LVA
40
CHL³
40
HUN
50
SVK
50
EST
60
POL
60
MEX³
70
LTU
70
Source: OECD (20 16), OECD Affordable Housing Database.
27
Spending on active labour market policies is
low
Pu blic e xp e n d itu re , % o f GD P, 2 0 15 o r m o s t re ce n t
DNK
SWE
FRA
FIN
HUN
NLD
AUT
BEL
LUX
DEU
ESP
CHE
IRL
PRT
NOR
OECD
ITA
POL
CZE
KOR
NZL
0.0
LTU
0.0
SVN
0.4
CAN
0.4
GBR
0.8
AUS
0.8
SVK
1.2
EST
1.2
CHL
1.6
ISR
1.6
LVA
2.0
JPN
2.0
USA
2.4
MEX
2.4
Source: OECD (20 17), OECD Em ploym ent and Labour Market Statistics (database).
28
Out-of-pocket payments in healthcare are high
H o u s e h o ld o u t-o f-p o cke t e xp e n d itu re , % o f to tal cu rre n t e xp e n d itu re o n h e alth care , 2 0 15
Source: OECD (20 17), OECD Health Statistics (database)
LVA
MEX
KOR
GRC
CHL
HUN
CHE
PRT
ISR
ESP
POL
ITA
EST
OECD
FIN
SVK
AUT
BEL
ISL
TUR
SWE
IRL
GBR
0
CAN
0
NOR
10
DNK
10
CZE
20
JPN
20
DEU
30
SVN
30
NLD
40
USA
40
LUX
50
FRA
50
29
Workers pay high fees for private pensions
Op e ratin g co s ts o f th e p rivate p e n s io n s ys te m
% of assets under management, 2015
LVA
EST
CZE
ESP
SVN
SVK
TUR¹
GRC¹
AUS
POL
CHL¹
CHE
HUN
NZL¹
ISR
CAN
0.0
AUT
0.0
BEL
0.4
NOR
0.4
ISL
0.8
PRT
0.8
GBR¹
1.2
DEU
1.2
LUX
1.6
NLD
1.6
DNK
%
2.0
FIN
%
2.0
Source: OECD (20 17), OECD Pensions Statistics (database).
30
Recommendations to improve access to jobs,
housing, and health services
Exp an d th e m o bility p ro gram m e , w h ich p ro vid e s te m p o rary
s u p p o rt fo r re lo catio n an d tran s p o rt to u n e m p lo ye d m o vin g
to a jo b.
Pro vid e m o re fu n d in g fo r lo w -co s t re n te d h o u s in g in are as
o f e xp an d in g e m p lo ym e n t.
Im p ro ve le gal ce rtain ty in re n tal re gu latio n an d e n co u rage
o u t-o f-co u rt p ro ce d u re s .
Sim p lify th e ad m in is trative p ro ce s s fo r o btain in g a bu ild in g
p e rm it.
Pro m o te th e p ro vis io n o f ad u lt e d u catio n by vo catio n al
e d u catio n s ch o o ls .
Lo w e r o p e ratin g co s ts in th e co m p u ls o ry p rivate p e n s io n
s ys te m , fo r e xam p le by in tro d u cin g a lo w -co s t fu n d as th e
d e fau lt ch o ice .
Re d u ce h e alth care o u t-o f-p o cke t p aym e n ts e s p e cially fo r
th e lo w -in co m e p o p u latio n .
31
Using budget and tax policy to support
inclusive growth
32
Government debt is low
Ge n e ral go ve rn m e n t d e bt % o f GD P, 2 0 16
JPN
GRC
ITA
PRT
BEL
FRA
GBR
ESP
OECD
USA
AUT
CAN
SVN
HUN
IRL
DEU
FIN
NLD
POL
ISL
ISR
0
SVK
0
LTU
40
SWE
40
DNK
80
CZE
80
AUS
120
LVA
120
KOR
160
CHE
160
NOR
200
NZL
200
LUX
240
EST
240
Source: OECD Economic Outlook 101 database. National Accounts definition of government debt (not Maastricht).
33
Informality remains high
Es tim ate d s ize o f th e s h ad o w e co n o m y an d u n d e rre p o rte d co rp o rate p ro fits an d w age s , 2 0 16
Source: Putniņš, T. and A. Sauka (20 17), "Shadow Econom y Index for the Baltic Countries", Stockholm School of Econom ics in Riga.
34
Taxes on low wages are high
Taxatio n o f labo u r in co m e , 2 0 16
% of total labour compensation, single person at 67% of average earnings without children
%
50
%
50
after tax reform
40
30
30
20
20
10
10
0
0
CHL
NZL
ISR
MEX
KOR
CHE
IRL
AUS
GBR
CAN
USA
ISL
NLD
JPN
LUX
OECD
NOR
DNK
POL
TUR
ESP
GRC
PRT
EST
FIN
SVN
SVK
CZE
ITA
SWE
LVA
AUT
FRA
DEU
BEL
HUN
40
Tax re fo rm appro ve d in 2 0 17 w ill re d u ce taxe s o n pro fits an d w age s fro m 2 0 18 .
Source: OECD (20 17), OECD Tax Statistics (database) and OECD estim ate of tax reform effect.
35
Recommendations for budget and tax policy to
support inclusive growth
Rais e s p e n d in g to ad d re s s p re s s in g s tru ctu ral an d s o cial
p o licy p rio ritie s .
Make be tte r u s e o f in fo rm atio n an d co m m u n icatio n
te ch n o lo gy fo r tax law e n fo rce m e n t.
Stre n gth e n th e bu d ge tary in d e p e n d e n ce o f th e
Co rru p tio n Pre ve n tio n an d Co m batin g Bu re au ( KN AB) .
Re m o ve p o litical in flu e n ce in th e ap p o in tm e n t o f ju d ge s .
Re d u ce taxe s o n lo w w age s fu rth e r.
Rais e m o re re ve n u e s fro m th e taxatio n o f re al e s tate an d
e n e rgy.
Bro ad e n th e bas e o f bu s in e s s in co m e taxatio n by
re m o vin g tax e xe m p tio n s .
36
For more information
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without
prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers
and boundaries and to the name of any territory, city or area.
http://www.oecd.org/eco/surveys/economic-survey-latvia.htm
OECD Economics
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37