Latvia 2026: the recovery is here, but its nature is changingLatvia 2026: the recovery is here, but its nature is changing

The recovery is now visible in the data

Following two years of contraction — −0.9% in 2023 and −0.4% in 2024 — Latvia’s economy grew by 2.1% in 2025. Available 2026 data indicate that the recovery continued and strengthened during the first half of the year.

In the second quarter of 2026, real GDP increased by 3.0% year-on-year and 0.7% compared with the previous quarter. Growth reached 2.8% for the first half of the year.

The composition of this growth deserves more attention than the headline number itself.

Trade is contributing strongly to the recovery, while manufacturing expanded by 5.5% in the second quarter, with activity increasing in 16 of the 22 manufacturing subsectors monitored by Latvia’s statistical office. Information and communication services also contributed positively, while transportation and storage remained under pressure.

The recovery is therefore no longer simply a consumption rebound after several difficult years. Part of the momentum is shifting towards investment and productive capacity.

Investment is becoming the key story

This is probably the most important economic signal to monitor in Latvia in 2026.

Investment had already rebounded by 9.8% in 2025, supported by private investment, European funding and defence-related expenditure. The European Commission expects investment to continue expanding in 2026 and 2027.

Behind these percentages are substantial amounts of capital.

Latvia’s Ministry of Finance estimates that more than €1.4 billion could be invested in 2026 through EU funds and the Recovery and Resilience Facility. By March 2026, calls under the 2021–2027 EU programming period already represented €3.9 billion, while contracts worth €2.8 billion had been signed.

These investments cover areas including road infrastructure, healthcare and educational facilities, digitalisation, energy efficiency and business development.

For a foreign company assessing Latvia, therefore, the relatively modest size of the domestic market tells only part of the story.

The investment flows passing through the country matter as well.

Security and defence are also reshaping demand

Latvia’s geography naturally influences its economic priorities.

The 2026 budget provides approximately €2.2 billion for defence, equivalent to 4.9% of GDP according to the NATO definition. At the same time, part of European funding is being redirected towards resilience, defence-industrial capabilities and security infrastructure.

This extends far beyond the purchase of military equipment.

It creates demand for infrastructure, energy, communications, cybersecurity, dual-use technologies, logistics, buildings, civil protection and the continuity of essential services.

New EEA and Norway Grants, for example, include investment in civil-protection shelters, generators and the resilience of healthcare and social-service infrastructure.

These developments deserve particular attention from French companies operating in energy, infrastructure, telecommunications, engineering and industrial technologies.

France–Latvia trade is accelerating again

The bilateral economic relationship is already benefiting from the improved environment.

Following a decline in 2024, bilateral trade in goods increased by approximately 9.1% in 2025.

French exports to Latvia rose by 14.2%, while French imports from Latvia increased by 1.6%. According to French customs data, France’s trade surplus reached approximately €217 million, more than 40% higher than a year earlier.

Bilateral statistics nevertheless require careful interpretation. Latvian and French data use different methodologies, and Latvia’s statistical office provides a different reading of the 2025 bilateral balance.

That statistical divergence does not alter the principal signal: flows of goods between the two economies increased significantly in 2025.

Services show a different picture. Bilateral services trade amounted to approximately €394 million in 2025, slightly lower than previously, with Latvia recording a services surplus.

Where should companies look next?

For French businesses, five broad areas deserve particular attention: infrastructure and construction, energy and energy efficiency, digitalisation, healthcare, security and dual-use technologies.

These are not necessarily the sectors that will record the highest statistical growth. They are areas where several important flows are converging: public policy, European funding, national or municipal budgets and investment requirements.

That convergence is what matters.

A public tender published today is generally the final stage of a process that started months, and sometimes years, earlier: policy decision, European funding, budget allocation, studies, permits and finally procurement.

To understand economic opportunities in Latvia, companies therefore need to look upstream of public tenders.

A stronger economy, but constraints remain

The recovery does not mean that every indicator is favourable.

The European Commission expects inflation of 3.6% in 2026 and highlights continuing cost pressures, including energy costs. Wages are also continuing to increase rapidly in a labour market where some skills remain difficult to recruit.

Public finances are another area to monitor. Spending related to defence, social benefits and investment is expected to maintain pressure on the government deficit over the coming years.

Latvia also remains a small and highly open economy whose performance depends strongly on the European economic cycle, regional trade and the geopolitical environment.

What CCEF.LV will monitor

Understanding Latvia’s economy can therefore no longer be limited to GDP, inflation and trade statistics.

CCEF.LV will progressively monitor the chain that transforms public policy and investment into real economic projects:

Funding → budget → project → investment → procurement → award → implementation.

This will include Latvian public procurement, European funding, investment programmes, major public and private projects and the evolution of the French economic presence in Latvia.

The objective is straightforward: identify what is changing in Latvia’s economy and understand what those changes mean in practical terms for French companies.