FDI returning to Latvia

RIGA - At the end of the first quarter this year, foreign direct investment accumulated in the Latvian economy stood at 6.5 billion lats (9.2 billion euros), which is 10 percent more than at the end of the first quarter of 2011, says an Economy Ministry report on the economic development in Latvia, reports Nozare.lv. The report notes that, as economic growth resumed after the crisis, foreign direct investment flows increased rapidly: in 2010, the total amount of foreign direct investment was four times larger than in 2009, and it further increased fourfold in 2011, reaching 5.5 percent of gross domestic product.

The global financial crisis has not affected the geopolitical structure of foreign direct investment accumulated in Latvia. At the end of this past March, direct investment by European Union member states accounted for 71.7 percent of total foreign investment accumulated in Latvia, of which one-fifth had come from the new EU member states, and almost a half from the euro area member states.

The largest amount of foreign direct investment in Latvia comes from Sweden. At the end of March this year, Swedish investments accounted for almost 25 percent of the total amount of foreign direct investment accumulated in Latvia, of which the bulk went into financial mediation. Since the first quarter of 2011, direct investments from Sweden have increased almost threefold, mostly due to transactions between Estonia and Sweden as a result of several acquisitions in the banking sector.

At the same time, Estonia’s direct investment accumulated in Latvia fell 56 percent to 5.8 percent of total foreign direct investment accumulated in Latvia at the end of this past March (14 percent at end-March 2011). Danish, Dutch, German, Norwegian, Finnish, Russian and Cypriot businessmen have also made major investments in Latvia; the total amount of investment from these countries made up more than 60 percent of total foreign direct investment in the Latvian economy at the end of March this year.

Most of foreign direct investment in Latvia goes into the services sector. At the end of this past March, foreign direct investment accumulated in Latvian services sectors accounted for 68.1 percent of all foreign investment accumulated in Latvia.

Foreign direct investment accumulated in Latvia increased particularly fast in the energy and processing industries from end-2008 to the end of this past March - by 41.1 percent and 29.5 percent respectively. In the processing industry, accumulated foreign investment increased 40.5 percent in the production of construction supplies and 68.1 percent in wood processing.