Latvia is in a historic phase of political stability, with Prime Minister Krišjānis Kariņš completing a full four-year term and being re-elected to lead a new coalition of three center-right parties. The current government’s priorities are to strengthen internal as well as external security, increase defense spending and introducing a conscription system.
Russia’s war against Ukraine has a significant impact on the Latvian economy and society. Planned projects are on hold, and Latvian export companies have difficulties in entering new markets in the “West” to replace those in Russia and Belarus. Furthermore, Latvia’s suspension of gas and oil imports from Russia has led to surging energy costs, contributing to one of the highest inflation rates in the EU.
The Latvian government have demonstrated their capacity to prioritize and execute challenging and sometimes contentious reforms. Currently, the country faces two long-term existential challenges that need to be addressed: demographic decline and faltering economic convergence with western Europe.
