Foreign investments in Latvia doubled this year, says economist

During the Covid-19 pandemic, the flow of foreign direct investment in Latvia has doubled, according to Latvian Radio's interview with economy experts October 20.

Before the pandemic, foreign investment in Latvia was stable, at around 2-3% of Latvia's gross domestic product. In 2020, foreign investment increased slightly, said Bank of Latvia economist Guntis Kalniņš.

“In the first half of this year, the flow of foreign investment has even doubled, which could seem contradictory to intuition. We see foreign funds continuing to pour into many industries. Industry, trade, and the real estate sector set the tone for the overall volume. These are sectors that have always been attractive to foreign investors in Latvia. The development of these sectors is also good at the moment, and foreign investors see good prospects for the future,” the economist said.

 

 

 

Traditionally, the most foreign investment in Latvia flows from nearby countries, from the European Union. Recently, according to Kalniņš, the bigger producers search for closer locations to the market where they open their plants.

“One of the most recent examples is the manufacturer of “Karcher” cleaning equipment, which builds a plant in Jelgava municipality. The increase in interest in nearby regions is also reflected in the fact that foreign investment growth is also trending in the Baltic region,” Kalniņš said.

The more foreign investment will flow into Latvia's regions, the better it is for the Latvian economy as a whole, said Zlata Elksniņa-Zaščirinska, member of the Foreign Investors Council in Latvia (FICIL).

“Unfortunately, it must be said that there are certain concentration sites for foreign investment at the moment. Of course, Riga and the vicinity are the main concentration sites. But then we could, of course, also talk about Ventspils, Liepāja, Daugavpils, Valmiera. Probably also Rēzekne in the context of the special economic area. Other places, even where, to some extent, there are perhaps more human resources, such as Latgale. There, foreign investment inflows aren't as intense. If we look at using full potential, it is certainly desirable,” the head of the council said.

“We often hear a lot of stories that municipalities want investors. At the same time, when an investor comes, they have a lot of trouble getting either a construction permit or building something because of different environmental conditions, because of population objections, and so on. Infrastructure, a location where people can move around and live, and good traffic are clearly important for additional foreign investment in the regions,” said Elksniņa-Zaščirinska.

Andra Feldmane, representative of the Latvian Association of Local Governments, said that the foreign investment in regions should be with a high added value. Also, local entrepreneurs should be encouraged to broaden their activity. Elksniņa-Zaščirinska, on the other hand, stressed that there is a need for more people with the skills and education to work in high-value plants.

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