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What is wrong with Latvia? Why the middle Baltic state lags behind

Latvia has often been overlooked when it comes to the socio-economic advancements made in the Baltics. While neighbours such as Estonia and Lithuania have promoted themselves as technological hubs, the middle Baltic state has lagged behind overall. This position appears to be due to a variety of factors.

The cover of the Latvian weekly current affairs magazine Ir for the last week of November 2024 struck a tone hardly unfamiliar in this neck of the woods: “Why are the Estonians paying less for Rail Baltica but getting it done faster?” Close observers of the nation’s mood, aspirations and insecurities over the three-and-a-bit decades since it restored its independence will have seen comparable sentiments expressed many times.

February 28, 2025 - Will Mawhood - AnalysisIssue 1-2 2025Magazine

Construction works at the Riga Central Station for Rail Baltica – the self-described “project of the century” that aims to link Berlin with Tallinn via Warsaw, Kaunas and Riga. With costs ballooning, the EU has declared itself unwilling to commit to further funding, meaning the Latvian government must now somehow come up with the vast outlay required. Photo: Tanya Keisha

Latvia, geographically the middle Baltic state, has been outpaced economically by Estonia more or less consistently since both restored their independence in 1990. It is not only a question of wages either. In terms of educational scores, healthcare outcomes, digital proficiency and unemployment rates, Latvia comes off worse – looking enviously north has become almost a national pastime.  

Above the main headline, though, there is a small box of text, advertising another, shorter feature in the magazine. This might well have come as a slight surprise to anyone who stopped paying close attention, say, 15 years or so ago – “Lithuanian economist recommends recipe for growth.”  

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