OECD Economic Surveys: Latvia 2024
Russia’s war of aggression against Ukraine has led to higher energy prices and disruptions
in trade and supply chains, weighing on economic growth. Economic convergence had
already slowed down before the pandemic, calling for accelerating structural reforms.
Rising spending pressures related to defence, internal security, health and old age
poverty need to be addressed by raising spending efficiency and tax revenue, while
the tax burden should be shifted from labour towards other income, property, and environmental
taxes. Continuing to improve the capacity of the public sector, fostering investment
and innovation and addressing skilled labour shortages are key for raising potential
growth. Low credit supply is a main factor for weak investment and should be tackled
by fostering competition and deepening capital markets. High informality, which hinders
access to finance and distorts the level playing field, should be addressed by reducing
labour taxes for low-wage earners, improving tax enforcement and continuing to fight
corruption. Strengthening the power of the Competition Council to enforce competitive
neutrality of state-owned enterprises and challenge regulation that restricts competition
would help to foster business dynamism and innovation. Addressing skilled labour shortages
will require facilitating skilled migration and investing more in human capital.
SPECIAL FEATURE: RAISING INVESTMENT TO SUPPORT GROWTH
Published on April 25, 2024 Latest available edition in: French
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