An analysis by Dr.oec Raivis Kakānis, Chairman of the Management Board of Industra Bank, and economist Morten Hansen reveals that Latvia’s export growth, trade balance, corporate lending, and investments in new products, technologies, innovations, and research and development lag behind Estonia and Lithuania. A targeted export policy is urgently needed.

Dr. oec Raivis Kakānis, Chairman of the Management Board of Industra Bank, together with economist and long-standing Head of the Department of Economics at the Stockholm School of Economics in Riga, Morten Hansen, has conducted a data analysis covering the development of Latvian exports over the past 30 years.

The conclusion is clear — since 2020, Latvia’s export growth has fallen behind its Baltic neighbours; its trade balance remains chronically negative; and the intensity of private-sector lending, investment in innovation and R&D is below the regional benchmark. The Bank is calling on the Government to implement a coordinated action plan to strengthen Latvia’s export performance.

“For many years, our negative foreign trade balance — the persistent gap between exports and imports — has been pulling Latvia deeper into the mud,” notes Dr.oec Raivis Kakānis. “Given Lithuania’s breakthrough — their export volume now exceeds that of Latvia and Estonia combined — we should not hesitate to learn from our southern neighbours. If we continue as before, the gap will only widen — not only with the Nordics but also within the Baltics.
The solution is well known: increase access to business financing, support higher value-added production, and encourage private-sector investment in R&D. Small economies grow by selling smarter products in bigger markets. For a country the size of Latvia, exports are the only foundation for sustainable growth. Long-term data show that our stagnation is not a result of a few weak years, but of long-term systemic policy mistakes.”

Key Findings

• Export growth 2020–2024: Latvia +42%, Estonia +59%, Lithuania +60%.
• Trade balance (2024): Latvia – €1.03 bn; Estonia + €0.22 bn; Lithuania + €4.06 bn.
• Exports as % of GDP: ~64% in 2023 (down from ~70% in 2022) – high for a small economy, yet insufficient given that imports continue to exceed exports.
• Market shift: Long-term reorientation from Eastern markets to the Baltics, Nordics and the UK — but exports remain focused on nearby regions, signalling low added value and limited processing depth.
• GDP per employee: Latvia has the lowest level in the Baltics; the gap with Nordic countries is widening each year. While the figure rises nominally due to demographic decline, in reality, Latvians are becoming poorer, not richer.
• Investment and lending: Private-sector credit-to-GDP ratio has dropped from 96.6% (2010) to 29.7% (2024) (Estonia 61.1%, Lithuania 36.0%).
• R&D investment: Below 1% of GDP — dominated by the public sector, unlike Estonia where private companies take the lead. Incentives are needed to increase private-sector participation.
• Industry structure: Strong in timber exports, yet mostly in low-value raw materials; very limited share of furniture, veneer, or finished goods. Other sectors lag behind — Latvia outperforms its neighbours only in wood exports.

“The numbers speak for themselves,” adds Morten Hansen. “Since 2020, both Estonia and Lithuania have significantly outperformed Latvia in exports and R&D investment. Latvia needs a practical, export-driven policy that shifts production towards higher-value goods and services.”

Why It Matters
Without decisive action, Latvia risks remaining a low-value-added producer — a supplier of industrial intermediate goods rather than finished, branded, and high-margin products.
This would mean slower wage growth, lower productivity, a weaker fiscal base, and a long-term trade deficit.

Industra Bank’s Call to Action for the Government

1. Increase growth-driven investment: Raise private-sector credit-to-GDP to 40–45% within 3–4 years; expand guarantee, co-funding, and export-credit programmes.
2. Support higher-value exports: Introduce tax incentives and grant-based schemes to boost advanced manufacturing.
3. Boost R&D intensity: Reach at least 1.5% of GDP within four years through targeted tax incentives and simpler recognition of research costs.
4. Achieve a positive trade balance: Move from deficit to balanced or positive within three years.
5. Enhance skills and productivity: Invest in training for sectors linked to automation, robotics, and quality manufacturing.

Industra Bank’s Own Commitments

• Increase financing for SMEs with export potential;
• Support clients in strengthening internal controls and compliance for third-country markets;
• Provide tailored payment solutions for secure transactions in distant markets.

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About Industra Bank
Industra Bank was established by local entrepreneurs with a focus on serving Latvia’s small and medium-sized businesses.
By mid-2025, the Bank’s total lending exceeded €120 million, while client deposits approached €300 million.
Industra Bank serves more than 16 000 clients through service centres in Rīga, Daugavpils, Liepāja, Ventspils, and Jelgava, as well as remotely.

For further information:
Ieva Zauere
Head of Marketing & Communications, Industra Bank AS
+371 29485726 | ieva.zauere(abols)industra.finance

Detailed data on export and GDP dynamics, trade balance, credit-to-GDP, R&D intensity, and industry breakdowns are available upon request.