Republic of Latvia: 2026 Article IV Consultation-Press Release; and Staff Report

Latvia faces structural challenges, with weak productivity and slow income convergence, compounded by rising fiscal pressures from defense, population aging, and energy security needs. Meanwhile, higher energy prices and escalating trade tensions have increased inflation risks and are weighing on exports and investment. Political fragmentation has increased following the collapse of the government, with a caretaker government expected to remain in place until the October elections.