Latvia falling behind its industrial targets - Economics Ministry

RIGA - Latvia has not attained any of the targets set forth in the National Industrial Policy Guidelines 2014-2020, the Economics Ministry said in a report. 

According to the document, Latvia's national industrial policy was supposed to promote structural reforms to increase the production of high value added products and services, boost the role of manufacturing, modernize industrial production and services and stimulate complex exports. 

According to the plan, the proportion of the manufacturing industry was expected to grow from 14.1 percent in 2011 to 20 percent by 2020. However, this target was not met as the proportion of manufacturing made up just 12.2 percent of Latvia's GDP in 2020. 

The ministry said that the Latvian economy is characterized by a low proportion of manufacturing, which barely exceeded 14 percent even during the years of fast growth. In the past decade, the manufacturing sector has been making up 12.3 percent of Latvia's GDP, which is less than in the EU average (16.7 percent). In Lithuania, by comparison, manufacturing makes up 19 percent of GDP and in Estonia 15.6 percent of GDP. 

Latvia also failed to increase the manufacturing sector's productivity by 40 percent against 2011 and to achieve the manufacturing sector's growth by 60 percent against 2011. 

The Economics Ministry indicated that in 2020 the manufacturing sector had grown by 22.7 percent against 2011, falling 37.3 percentage points behind the growth target. The ministry said that the goal was not achieved because economic growth slowed in Latvia's traditional export markets. 

By 2020, the manufacturing sector had managed to increase productivity by 26.6 percent against 2011, which is 13.4 percentage points below the target. The ministry indicated that since 2011, the sector's productivity has been growing by an average of 2.7 percent a year as the number of people employed in the sector declined by an average of 0.3 percent a year and value added in manufacturing grew by an average of 2.3 percent a year. 

Latvia had also aimed to increase R&D spending from 0.7 percent of GDP in 2011 to 1.5 percent of GDP by 2020. That target was not met either as Latvia's R&D spending reached just 0.64 percent of GDP in 2020. 

The Economics Ministry noted that since 2011, R&D spending had grown by nearly 40 percent, largely thanks to increased investing in the higher education sector where the increase has been 56 percent. Meanwhile, R&D spending in the business sector has been growing at a more moderate pace, by 31 percent. 

The ministry said that in the past decade, Latvia's per capita R&D spending averaged at EUR 74, which is just 13 percent of the EU average (EUR 582).