In the business environment, this year can be seen as similar to GDP dynamics – it has been a wavy one, with no significant year-on-year growth. The situation in export markets has made the daily life of Latvian businesses more difficult, and the geopolitical situation has become even more complicated, contrary to what was expected at the end of last year.

The increasing quality of dialogue with the public administration is a positive trend. However, this does not always result in very concrete initiatives to improve the business environment. Policy makers have also finally heard years of calls from business for a solution to simplify the labour tax system and improve competitiveness. But there has been no significant improvement in reducing administrative burdens and red tape, despite the fact that the fight against red tape is already being tackled at European Union level. Business sentiment, as measured annually by the LCCI index, also remains pessimistic, although data show a cautious improvement in sentiment.

Next year will be significant with the upcoming local elections, which will raise the issue of financial incentives for local governments to attract business, which has long been a suggestion of the LCCI to policy makers. In macroeconomic terms, the LCCI expects a positive effect from further ECB rate cuts, which, even if not significant, will improve people’s purchasing power in both domestic and foreign markets.

Equally important for Latvia and the Baltic region will be the desynchronisation of the BRELL power grid, thus strengthening Latvia’s energy independence. It is hoped that Latvian electricity consumers will not face unforeseen price increases as a result of this step.

As 2025 is the 90th anniversary year of LTRK, various unprecedented events are expected throughout the year, which will certainly be appreciated by entrepreneurs and everyone interested in the Latvian business environment.

At the international level, it is essential that the European Union moves rapidly to improve its policies in the areas of investment, employment and innovation, with the new European Commission finding ways to accelerate the bloc’s development. This may be particularly important if the new US administration urgently raises the issue of trade tariff policy. The increasing focus on reconciling defence needs with the difficult budgetary situation will also not allow Latvia or the EU as a whole to relax.

Notwithstanding the above, the LCCI forecasts stronger GDP growth next year compared to 2024. This could result from a faster implementation of the European Union funds programmes, which have so far often been delayed in the development process, as well as from the slow recovery of export markets and the above-mentioned aspects of a more vibrant internal market.