Latvia

Latvia's Residential Real Estate Market Analysis 2025

Lalaine C. Delmendo
Last update:
Next update: October 2026

Latvia's housing market is steadily recovering, with both property transactions and residential construction activity showing strong growth. Consequently, house prices are rising once more in Riga and across much of the country.

This report provides an overview of Latvia's housing sector, covering market trends, demand and supply dynamics, historical developments, rental and mortgage conditions, and the broader socio-economic context.

Table of Contents

Housing Market Snapshot

In Riga, Latvia's capital city, apartment prices increased by 1.77% to €863 (US$1,013) per square metre (sqm) in August 2025 as compared to the same period last year, in contrast to the prior year's 3.42% decline, according to Arco Real Estate's report. It was the eighth consecutive month of year-on-year price growth and its best showing since November 2022.

Yet when adjusted for inflation, apartment prices in the capital city are still down, falling by 2.25% y-o-y in August 2025.

Apartment prices in Riga were up slightly by 0.12% (0.35% in real terms) month-on-month over the same period.

Latvia's house price annual change:

Note: Latvia (Riga) House Price Index: Average Price Per Square Meter (EUR) For Standard Type Apartments
Data Source: Arco Real Estate.

Nationwide, residential property prices are now rising strongly. Figures from the Central Statistical Bureau of Latvia showed that nationwide house prices rose by a robust 6.74% in Q2 2025 from a year earlier, following year-on-year increases of 5.44% in Q1 2025, 7.31% in Q4 2024, 5.25% in Q3 2024, 0.72% in Q2 2024, and 3.62% in Q1 2024. Quarter-on-quarter, nationwide house prices were up by 3.23% during the latest quarter.

By property type:

  • New dwellings: prices increased slightly by 1.18% y-o-y in Q2 2025, a sharp slowdown from the prior year's 11.34% growth. Quarterly, prices were up by 3.13% in Q2 2025.
  • Existing dwellings: prices rose strongly by 8.28% in Q2 2025 from a year ago, a positive turnaround from the previous year's 2.44 decline. Quarter-on-quarter, prices increased by 3.24% during the latest quarter.

Latvia Nationwide House Prices graph

Property demand is growing strongly again. In the first half of 2025, activity in Riga's new residential projects surged by 31% as compared to H2 2024 and by 46% compared to H1 2024, according to Arco Real Estate's H1 2025 property market report.

Overall, the premium real estate market in Latvia is also marked by a strong increase in transaction volume, reaching more than €250 million in H1 2025 - up strongly by 28% from H1 2024 and the highest level recorded in the past five years, according to Sotheby's International Realty.

Likewise, residential construction activity is gaining momentum. During 2024, the total number of new dwellings authorized in Latvia surged by 48.3% to 4,058 units compared to the preceding year, in contrast to a year-on-year contraction of 12.9% in 2023, according to the Central Statistical Bureau of Latvia. Likewise, the area of new dwellings authorized also increased strongly by 57.2% y-o-y to 593,000 square meters last year, following a decline of 13.2% in the prior year.

Then in the first half of 2025, both the number and area of new dwellings commissioned rose further by 34.4% and 27.2%, respectively, as compared to a year earlier.

The overall economy remains fragile but has shown signs of gradual improvement in recent months. During 2024, Latvia's economy contracted by 0.4% from a year earlier, following annual expansions of 2.9% in 2023, 1.8% in 2022 and 6.9% in 2021. This was primarily attributable to the challenging geopolitical environment and heightened uncertainty, which exerted a dampening effect on consumption and, in particular, on investment.

But in Q2 2025, Latvia's economy expanded by 1.7% from the same period last year, a sharp improvement from year-on-year declines of 0.3% in Q1 2025, 0.4% in Q4 2024 and 1% in Q3 2024. It was the country's best showing since Q3 2023.

The IMF expects Latvia's economy to expand by 1% this year, mainly driven by public investment. Yet the latest forecast released by the European Commission is more conservative, projecting a minuscule real GDP growth for Latvia of 0.5% this year.

House Price Dynamics:

House prices outside Riga

Housing markets in the vicinity of Riga are gaining momentum. 

  • In Ogre, the average price of standard-type apartments rose by 3.2% in August 2025 from a year earlier to €871 per sqm, according to Arco Real Estate. This was an improvement from a y-o-y decline of 2.9% seen in August 2024.
  • In Kauguri, Jūrmala, apartment prices were up by 4.1% y-o-y to an average of €812 per sqm over the same period. This was in stark contrast to the y-o-y price fall of 5.1% recorded in August 2024.
  • In Salaspils, apartment prices increased slightly by 1% to an average of €835 per sqm in August 2025 from the same period last year - a positive turnaround from a y-o-y decline of 5.1% in August 2024.
  • In Jelgava, apartment prices rose modestly by 3.3% in August 2025 from a year earlier, to an average of €758 per sqm. It followed a 2.5% y-o-y price growth in the preceding year.

Latvia Apartment Prices in the Vicinity of Riga graph

Historic Perspective:

Latvia's housing boom and bust

Latvia had one of the world's biggest housing market crashes after 2007. In the second half of 2007 house prices began to fall, having risen almost 700% from 2000 to 2007, and inflation ballooned.

The economy shrank by about 25% from the start of the global crisis in 2008 to end-2010, making it the deepest depression recorded worldwide. Unemployment surged from 6.1% in 2007 to 19.5% in 2010, despite Latvia securing a €7.5 billion standby loan from a group led by the European Union (EU) and the International Monetary Fund (IMF). The bailout prevented total economic collapse but was coupled with rigid austerity measures. The country's fiscal deficit shot up, capital left the country, exports fell, and domestic demand collapsed.

  • In 2007, apartment prices fell by 5% (-16.7% in real terms) from a year earlier.
  • In 2008, apartment prices plummeted by 30.5% (-37.1% in real terms) from the preceding year.
  • In 2009, property prices plunged by another 42% y-o-y (-41.3% in real terms).

Then in 2010, the housing market started to recover, with house prices rising by 5% (2.4% in real terms). House prices continued to increase by 5.8% in 2011 (1.7% in real terms), 2.1% (0.5% in real terms) in 2012, 3.2% (3.3% in real terms) in 2013-14, and 0.4% (zero growth in real terms) in 2015.

The housing market regained its momentum in 2016, thanks to strong economic growth, coupled with limited supply. House prices rose by 7.6% (5.3% in real terms) in 2016 and by another 8.8% (6.5% in real terms) in 2017.

The housing market has lost momentum since, with house price growth slowing to 3.9% (1.3% in real terms) in 2018 and further to 2.8% (0.5% in real terms) in 2019. During 2020, house prices fell 1.5% (-1% in real terms) due to the adverse impact of the Covid-19 pandemic.

After strengthening in 2021 with a house price growth of 11.8% (3.6% in real terms), the housing market slowed again in 2022, amidst high inflation and rising interest rates, coupled with the negative effects of the Ukraine war. House prices in Riga rose slightly by 1.6% during 2022 but actually declined by a huge 16% when adjusted for inflation.

The housing market weakened further in 2023, with house prices falling by 7.1% (-7.7% in real terms). The housing market's performance remained lackluster in 2024, with house prices registering zero nominal growth (but declined by 3.2% when adjusted for inflation).

Latvia House Price Indices graph

Demand Highlights:

Demand increasing rapidly

Property demand is growing strongly again. In the first half of 2025, activity in Riga's new residential projects surged by 31% as compared to H2 2024 and by 46% compared to H1 2024, according to Arco Real Estate's H1 2025 property market report.

In H1 2025:

  • In Riga's housing estates, the number of transactions soared by 36% from 810 units in H2 2024 to 1,103 units in H1 2025.
  • In the centre of Riga, the number of transactions increased by 7% from 169 units in H2 2024 to 181 units in H1 2025.

"This year, the number of transactions in the first half of the year was higher than in the second half of 2024 both in Riga's housing estates (+36%) and in the centre of Riga (+7%)," said Arco Real Estate.

"Looking at the number of transactions involving apartments in new projects in Riga in 2025, it can be concluded that most transactions (42%) took place in the price range of €100,000 to €150,000. In this price range, 90% of transactions were registered in Riga's housing estates," added Arco Real Estate.

Accordingly, in the centre of Riga, most apartment sales were in the €100,000 to €150,000 range. Over half (56%) were two-room units, found both in early 2000s buildings and newer constructions. A large share of these sales came from the newly built Ģertrūdes kvartāls project at 65 Ģertrūdes Street, where small two-room apartments (39-61 sqm) were sold at prices exceeding €3,000 per sqm.

In Riga's housing estates, sales were also concentrated in the €100,000 to €150,000 price range, mainly in the new Mārpagalmi project at 15 Zemaišu Street.

Overall, the premium real estate market in Latvia is also marked by a strong increase in transaction volume, reaching more than €250 million in H1 2025 - up strongly by 28% from H1 2024 and the highest level recorded in the past five years, according to Sotheby's International Realty.

According to the report, the analysis is based on Land Registry data (registered up to July 9, 2025) and covers transactions in Riga, Jūrmala, and the Pierīga municipalities (Ādaži, Ķekava, Mārupe, Olaine, Ropaži, Salaspils, Saulkrasti, and Sigulda). The premium segment includes:

  • Apartments and terraced/semi-detached houses priced from €150,000
  • Private houses priced from €350,000 (main house area only)
  • Land for private houses priced from €150,000

"The main driver of growth was the apartment segment in Riga, where particularly high activity was recorded. The market in the suburbs of Riga strengthened as a stable alternative, while in Jūrmala it remained volatile, but with an upward trend in the exclusive segment. A total of around 1,000 exclusive apartment transactions, 50 private house transactions and 15 land transactions were registered," said Sotheby's.

Latvia Apartment Transactions in Riga's New Housing Projects graph

Foreign buyers dominate the housing market

Foreigners, who buoyed the market in recent years, typically account for about 70% of all property transactions in the country annually. They are attracted to Latvia partly because it has one of the lowest house prices in Europe. In addition, foreigners get a five-year residence permit in Latvia if they buy residential real estate, under Immigration Law amendments implemented on July 1, 2010. The conditions were then:

  • The transaction should exceed €142,000 (US$166,620) in Riga or Jurmala, or €71,000 (US$83,310) in other regions;
  • Only non-cash funds may be used to buy real estate;
  • The buyer must not have any real estate tax arrears in Latvia (and must never have had such arrears);
  • Transaction concluded after July 1, 2010.

In September 2014, Immigration Law amendments increased the threshold for obtaining a residence permit and introduced other conditions and costs, if a foreigner's real estate was registered in the Land Register after September 1, 2014:

  • The minimum transaction value of the real estate must be €250,000 (US$293,345) in large cities or at least €125,000 (US$146,672) in other places (in which case at least two properties must be bought), according to Baltic Legal.
  • The total cadastral value of the property at the time of acquisition should be at least €80,000 (US$93,870).
  • Payment of a state budget contribution worth 5% of the real estate's transaction value.

In recent years, most of the in-demand properties were located in Riga and Jurmala, according to the Office of Citizenship and Migration Affairs. Russians were the top residential real estate investors in Latvia, followed by Ukrainians, Chinese, Kazakhs, and Uzbeks, according to Arco Real Estate's chairman of the board of directors, Aigars Smits.

Supply Highlights:

Residential construction activity picking up

During 2024, the total number of new dwellings authorized in Latvia surged by 48.3% to 4,058 units compared to the preceding year, in contrast to a year-on-year contraction of 12.9% in 2023, according to the Central Statistical Bureau. Likewise, the area of new dwellings authorized also increased strongly by 57.2% y-o-y to 593,000 square meters last year, following a decline of 13.2% in the prior year.

After a strong recovery last year, the residential construction sector continues to gather pace this year, with both the number and area of new dwellings commissioned rising by 34.4% and 27.2%, respectively, in the first half of 2025 as compared to a year earlier.

Latvia New Dwellings Authorized graph

By region, during the year to H1 2025:

  • In the Riga region, both the number and area of new dwellings commissioned surged by 33% and 31.6% y-o-y, respectively.
  • In Pierīga, which accounted for more than half of the total dwellings commissioned, both the number and area of permits rose strongly by 46.5% and 37.7%, respectively.
  • In Vidzeme, the number of dwelling permits soared by 28.6% y-o-y and the area increased strongly by 17.2%.
  • In Kurzeme, the number of new dwelling permits dropped by a modest 5.3% while the area of said permits fell by 7.3% in H1 2025 from a year earlier.
  • In Zemgale, the number and area of dwelling permits increased by 11.8% and 1.3%, respectively.
  • In Latgale, both the number and area of new dwelling permits rose strongly by 26.9% and 15.7%, respectively.

Riga and Pierīga regions accounted for more than three-fourths of all new dwelling authorizations in the first half of 2025.

In August 2025, the total number of apartments offered for sale in Riga was 24% lower as compared to the previous year. In fact, the supply of apartments in the largest housing estates of Riga declined by 26% over the same period, according to Arco Real Estate. The largest supply of apartments was in Āgenskalns while the smallest supply was in Bolderāja.

The total housing stock in Latvia reached 77.75 million square meters in 2020, the latest figures available from the Central Statistical Bureau of Latvia.

Latvia Housing Stock graph

Rental Market:

Rental yields are good but the rental market remains underdeveloped

Apartments located in Latvia can earn gross rental yields ranging from 4.29% to 9.86%, with a national average of 7.89% in Q2 2025, not significantly different from 8.06% in Q2 2024 and 7.81% in Q3 2023, according to research conducted by the Global Property Guide.

  • In Riga, apartments offer gross rental yields ranging from 6.72% to 7.59% in the city centre, 4.73% to 5.56% in Agenskalns, and 7.95% to 9.81% in Vecriga. On average, the gross rental yield in Riga stood at 8.61% in Q2 2025.
  • In Jurmala, rental yields range from 4.29% to 9.86%, with an average of 7.17% over the same period.

However, Ober Haus' figures are lower, with residential yields at the city center averaging 4.9% in 2023, up from 3.7% in 2022 and 3.9% two years earlier.

Latvia's rent price index:

Data Source: OECD.

Round-trip transaction costs are low to moderate in Latvia. See our Property transaction costs analysis for Latvia.

Latvia's rental market remains poorly developed, according to a study published by the OECD. About two-thirds of the rental market consists mainly of Soviet-era housing and a third of the population lives in overcrowded housing units. Only 12% of the country's housing stock is offered as rental accommodations.

A new law on the Lease of Dwelling Premises came into force in May 2021, which regulates the relations between the tenant and the landlord of a dwelling - defining their rights, duties, and responsibilities, the grounds for termination of the contract, and the basic terms of the lease agreement.

While no entirely new law has replaced the 2021 law vis-à-vis residential leases, several related laws have been amended that may affect lease agreements, tenant rights, and landlord obligations. For instance, the Law on Residential Properties (Dzīvokļa īpašuma likums), which covers apartment ownership, common property, and the duties of co-owners, has undergone several updates, the latest on 30 May 2024. Another important change came in June 2025, when the Apartment Ownership Law was amended to make new owners responsible for certain debts tied to an apartment, such as unpaid utilities or reserve fund contributions, even if those debts arose before the property changed hands.

Apartment rents rising modestly

In Riga, monthly rents for two-bedroom apartments in posh neighborhood ranged from €765 (US$898) to €2,000 (US$2,347) per month in Q2 2025, up by around 4% to 5% from a year earlier, according to the Global Property Guide.

This was supported by earlier reports conducted by Latio and Ober Haus. According to Latio, monthly rents for two-bedroom apartments in new developments in the Centre rose by 4.5% to €690 (US$810) during 2023.

Rents for standard apartments located in residential areas in Riga, based on the 2024 Real Estate Report published by Ober Haus:

  • One-bedroom apartments: €200 (US$235) to €400 (US$469) per month in residential areas; €400 (US$469) to €600 (US$704) per month in the city centre; and €800 (US$939) to €1,200 (US$1,408) per month for exclusive apartments in the city centre and old town;
  • Two-bedroom apartments: €250 (US$293) to €450 (US$528) per month in residential areas; €550 (US$645) to €700 (US$821) per month in the city centre; and €900 (US$1,056) to €1,400 (US$1,643) per month for exclusive apartments;
  • Three-bedroom apartments: €500 (US$587) to €800 (US$939) per month in residential areas; €600 (US$704) to €900 (US$1,056) per month in the city centre; and €1,000 (US$1,173) to €2,000 (US$2,347) per month for exclusive apartments in the city centre and old town.

In the neighborhoods of Āgenskalns, Imanta, and Ziepniekkalns situated at the left bank, rents for 2-BR apartments in new projects ranged from €490 (US$575) to €645 (US$757) per month. In the neighborhoods of Purvciems, Kengarags, and Teika located in the right bank, rents for the same property in new projects ranged from €415 (US$487) to €545 (US$639) per month.

LONG-TERM RENTS IN TOP NEIGHBORHOODS & PROJECTS IN RIGA (EUR/month)
Neighborhoods Project Type 1-room Apartment 2-room Apartment
Imanta Series-type project 255 300
New project 405 520
Āgenskalns Series-type project 280 360
Non-renovated historical project 260 350
New project 440 645
Ziepniekkalns Series-type project 260 320
New project 370 490
Centre Non-renovated historical project 350 510
New project 470 690
Purvciems Series-type project 255 320
New project 395 490
Teika Series-type project 275 335
New project 290 545
Ķengarags Series-type project 240 280
New project 295 415
Non-renovated historical project 250 315
Source: Latio

Mortgage Market:

Interest rates continue to stabilize

In September 2025, the European Central Bank (ECB) kept its key interest rate - the main refinancing operations - unchanged at 2.15%, as inflation remains close to the 2% medium-term target. This followed eight consecutive rate cuts in the past sixteen months from 4.50% in May 2024.

Latvia's mortgage loan interest rates:

Data Source: ECB.

The ECB also decided to keep the interest rates on the deposit facility and the marginal lending facility unchanged at 2.00% and 2.40%, respectively.

"The Governing Council today decided to keep the three key ECB interest rates unchanged. Inflation is currently at around the 2% medium-term target and the Governing Council's assessment of the inflation outlook is broadly unchanged," said the ECB monetary policy decision press release.

"The Governing Council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the Governing Council's interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path," added the press release.

Latvia ECB Repo Rate graph

Following the recent ECB moves, interest rates for housing loans continue to fall.

For new housing loans, the average interest rate stood at 3.98% in July 2025, noticeably down from 5.68% in the previous year and 5.71% two years ago.

By initial rate fixation (IRF), in July 2025:

  • Floating rate and up to 1-year IRF: 3.68%, far lower than the 5.26% in the previous year and 5.45% two years ago.
  • 1-5 years IRF: 11.12%, down from 12.06% in the previous year but still higher than the 10.38% two years earlier.
  • 5-10 years IRF: 8.72%, down from 9.59% in the same period last year and 9.42% two years ago.
  • Over 10 years IRF: 4.18%, lower than the 5.46% a year earlier and 5.64% two years ago.

Latvia Interest Rates on New Housing Loans graph

For outstanding housing loans, the average interest rate was 4.34% in July 2025, sharply down from 5.99% in the same period last year and 5.76% two years earlier.

By maturity, in July 2025:

  • Housing loans with maturity of up to 1 year: 5.32%, down from 6.33% a year earlier and 5.99% two years ago.
  • Housing loans with maturity over 1 year and up to 5 years: 10.47%, lower than the 11.07% in the previous year and 10.92% two years ago.
  • Housing loans with maturity over 5 years: 4.25%, sharply down from 5.92% in July 2024 and 5.7% in July 2023.

Latvia Interest Rates on Outstanding Housing Loans graph

Small mortgage market

During 2024, the size of the Latvian mortgage market as a percentage of GDP stood at 12.6%, down from 14.4% of GDP in 2020, 20.7% of GDP in 2014 and 37.2% of GDP in 2009, based on figures from the Global Property Guide.

The continued decline in the size of the mortgage market indicates that it has not yet truly recovered from the 2008-09 global financial crisis, despite the introduction of the state-guaranteed mortgage loan programme in 2015, under which the Latvian Development Finance Institution (ALTUM) provides guarantees for mortgage loans for families with children and young professionals.

The Housing Guarantee Programme in Latvia provides guarantees ranging from 5% to 30% of the total loan amount, depending on the number of children, with additional increases for energy-efficient homes. Since the program's inception, it has supported about 25,000 families and reached a total investment of €1.9 billion (US$2.23 billion).

Yet financing and state support remain insufficient. About 44% of households are unable to qualify for the government's financial assistance or meet mortgage requirements, the OECD study noted.

In August 2025, the total amount of outstanding housing loans rose strongly by 8.5% to €5.4 billion (US$6.34 billion) from a year earlier, an acceleration from a y-o-y growth of 4% in the same month last year and 2.1% two years ago, according to the figures released by the Bank of Latvia.

After registering an annual average growth of 71% from 2000 to 2008, outstanding housing loans declined by an average of 5.4% per year from 2009 to 2018. Housing loan growth moderated to 3.7% annually from 2019 to 2024.

Latvia Housing Loans Outstanding graph

Socio-Economic Context:

Latvia's economy is now improving, inflation increasing again

During 2024, Latvia's economy contracted by 0.4% from a year earlier, following annual expansions of 2.9% in 2023, 1.8% in 2022, and 6.9% in 2021. This was primarily attributable to the challenging geopolitical environment and heightened uncertainty, which exerted a dampening effect on consumption and, in particular, on investment.

"In 2024, real GDP fell by 0.4%. This was mostly due to the adverse geopolitical context and increasing uncertainty weighing on consumption and especially investment," said the European Commission. "Supported by strong wage growth, private consumption recovered from its contraction in 2023 but remained weak (0.5%). Private investments were also hampered by high financing costs, while public investments, in particular EU co-financed programmes, faced delays. As a result, after solid growth in 2023 (9.9%), investment significantly declined in 2024 (-6.7%). Goods and services export growth was negative in 2024 due to a weak external environment and a deterioration in cost competitiveness. Strong growth of public consumption provided support to the economy."

But the economy has been showing some improvements recently. In Q2 2025, Latvia's economy expanded by 1.7% from the same period last year, in sharp contrast to year-on-year declines of 0.3% in Q1 2025, 0.4% in Q4 2024 and 1% in Q3 2024, according to the Central Statistical Bureau of Latvia. It was the country's best showing since Q3 2023.

By GDP component:

  • Gross capital formation surged by 22.3% y-o-y in Q2 2025.
  • Government spending also increased by 2% y-o-y in Q2 2025.
  • Household consumption, in contrast, remains weak, declining slightly by 0.3% in Q2 2025 from a year earlier.
  • In terms of external demand, imports rose by 7.1% y-o-y in Q2 2025 - much faster than exports' growth of just 2.3% over the same period.

On a seasonally-adjusted quarterly basis, GDP expanded by 0.4% during the latest quarter, a slight improvement from a quarter-on-quarter growth of 0.1% in the previous quarter.

After registering a robust annual growth of 8.6%, on average, from 2000 to 2007, the economy plunged into a prolonged recession during the global financial crisis. The Latvian economy contracted by 3.2% in 2008, 14.3% in 2009, and 4.5% in 2010. The economy recovered since, but growth had been more uneven and modest, with an average annual growth of 3.3% from 2011 to 2019. The country suffered another economic contraction of 3.5% in 2020, due to pandemic-related restrictions and lockdowns.

The Latvian economy bounced back strongly in 2021, registering a robust growth of 6.9%. It was followed by a more modest growth of an average of 2.3% annually in 2022 and 2023 before suffering a contraction in 2024.

The IMF expects Latvia's economy to expand by 1% this year, mainly driven by public investment. The latest forecast released by the European Commission is more conservative, projecting a minuscule real GDP growth for Latvia of 0.5% this year.

"In 2025, the economy is expected to recover slowly from the 2024 contraction. Real disposable incomes and private consumption are set to benefit from solid wage growth and the expected increase in disposable income due to the tax reform," said the European Commission. "However, increasing uncertainty amid a challenging geopolitical context is set to encourage precautionary savings."

Latvia GDP Growth and Unemployment graph

The country recorded a budget deficit equivalent to 1.8% of GDP in 2024, an improvement from shortfalls of 2.4% in 2023, 4.9% in 2022, 7.2% in 2021, and 4.1% in 2020, according to Eurostat. However, it remains far above the pre-pandemic deficit of just 0.2% of GDP in 2019, 1.4% in 2018, 0.3% in 2017, and a balanced budget in 2016.

In the first half of 2025, total revenues of the consolidated state budget amounted to €8.93 billion (US$10.48 billion) while the expenditure totalled €9.18 billion (US$10.77 billion), resulting to a deficit of €253.1 million (US$297 million), according to the Ministry of Finance. This was in stark contrast to the surplus amounting to €604 million (US$708.72 million) recorded a year earlier.

"Last year, total revenue grew faster than expenditure, ensuring a positive balance. The growth in foreign financial assistance (FFA) revenue, which exceeded the growth rate of expenditure, played a significant role. In accordance with the FFA repayment cycle, FFA revenue is significantly lower (by 500.7 million euros) in the first seven months of this year, thus increasing the deficit level in the state basic budget," said the Ministry of Finance.

As a result, the European Commission expects Latvia's deficit to increase again to approximately 3.1% of GDP this year and in 2026.

Latvia's public debt stood at 46.8% of GDP in 2024, up from 44.6% in 2023 and 44.4% in 2022. In fact, it is far higher than the 36.5% of GDP recorded before the Covid-19 pandemic and the highest public-debt-to-GDP ratio recorded since 2010. The public debt is expected to widen further to around 48.6% of GDP this year and to 49.3% in 2026.

"The government has recently committed to increasing defense spending to 5 percent of GDP from 2026 onwards. In the absence of measures to raise fiscal revenues and reprioritize government spending, Latvia's structural fiscal deficit (including one-off expenses) is projected to average about 3 percent of GDP in the medium-term," said the IMF. "This would raise public debt close to 50 percent of GDP in 2030, eroding fiscal space and limiting the authorities' ability to address large adverse shocks in the future."

Labor market conditions are improving again. In Q2 2025, the nationwide unemployment rate in Latvia was 6.7%, a sharp decline from 7.4% in the previous quarter and lower than the 6.9% recorded in the same period last year, according to the Central Statistical Bureau of Latvia. This is much lower than the country's jobless rate from 2009 to 2012, which averaged 17.1%, then fell to 8.4% from 2013 to 2024.

In Q2 2025, the total number of unemployed persons fell by 8.4% q-o-q to 63,700.

Inflation rose to 4.1% in August 2025, up from 3.8% in the previous month and the highest level since August 2023, mainly driven by faster price growth in food and non-alcoholic beverages, and housing and utilities, among others. Despite this, it is far below the record high inflation of 22.2% seen in September 2022. Inflation averaged 1.5% annually from 2010 to 2021, before skyrocketing to 17.2% in 2022. It remained elevated at 9.1% in 2023 before easing sharply to just 1.3% in 2024.

The overall inflation is expected to average 3% this year, before falling again to 1.5% in 2026.

On January 1, 2014, Latvia adopted the euro. Then, in July 2016, the country officially became the 35th member of the prestigious OECD.

Latvia Inflation Rate graph

Sources:

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Historical & Current m2/sqft Prices