Latvia has a population of 1.9 million. It belongs to the group of high-income countries. It has been a a EU member since 2004 and Latvia joined the Eurozone in 2014.
The country has benefitted from Eurozone membership to experience much more smoothed contagion from global shocks. Public debt has decreased to a very low level before the Covid outbreak (36.8% of GDP in 2019), as the country ran small fiscal deficits and benefitted from fast GDP growth. It gave the leeway to ease fiscal policy, Along with the implementation ECB’s monetary stimulus. As a result, Latvia suffered from a limited recession in 2020 (-3.5%) compared to peers. European Banking Association (EBA) membership has been key to improve banking rules and delivered more credibility to supervision, after several episodes of bank failures during the last decade.
