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PR 2.2:/. 35> DEC 4 5 WH An Economic Profile Requesters may obtain subscriptions to publications similar to this one by addressing inquiries to: Document Expediting (DOCEX) Project Exchange and Gift Division Library of Congress Washington, D.C. 20540 or: National Technical Information Service 5285 Port Royal Road Springfield, VA 22161 Requesters interested in subscription service may purchase specific publications either in paper copy or microform from: Library of Congress Washington, D.C. 20540 or: National Technical Information Service 5285 Port Royal Road Springfield, VA 22161 (To expedite service call the NTIS Order Desk (703) 487-4650) Comments and queries ou this paper may be directed to the DOCEX Project at the above address or by phone (202-/07-9527), or the NTIS Office of Customer Services at the above address or by phone (703-487-4660). Latvia: An Economic Profile August 1992 Latvia: An Economic Profile Preface This is one in a series of profiles on the republics of the former Soviet Union principally intended to provide basic reference material as a back- drop for assessing future developments in these new states. The profile pro- vides a description of the geography, population, and economy of Latvia and compares its level of development, growth, and social welfare to that in Finland and Sweden. International comparisons, particularly for aggregate measures such as GNP, are difficult to make because of differences in definitions and methods used by various countries in compiling statistics. International currency exchange rates are deficient for this purpose because they do not reflect relative purchasing power of different currencies over the whole range of output of goods and services included in GNP. Because of the lack of these parities, alternative measures have been selected. These measures include data for which comparable international statistics were available. For the most part, official statistics in the public domain provided the data used in this profile. The Latvian statistical abstract (National Economy of Latvian SSR) was the most important source of data. Extensive use was also made of Trud v SSSR (Labor in the USSR), Sotsial’noye razvitiye v SSSR (Social Development in the USSR), and the Perepis’ naseleniya (Population Census). Reference country comparisons relied on the information found in those countries’ statistical abstracts and in various OECD publications covering national accounts, food production, and the like. More detailed statistics are included in the appendix. Reverse Blank Contents Preface ; iil Geography and Climate l History and Government | 2 Population and Labor Force _ 2 Structure and Performance of the Economy ee ee Aggregate Measures | 5 Industry 6 _ Agriculture - 7 oe ; 8 Transportation _ dl Investment oe 7 7 12 7 Economic Reform ee 13 - Privatization BS 4 Inflation and Unemployment i —s—‘“‘“‘i;i‘;éCs*rH CC Foreign Economic Relations ee Ss Living Standards and Social Indicators BS 6 Personal Income eee _ 16 a Food Consumption ee ee Inventories of Selected Consumer Durables ee 7 17 Housing ; ee _ 1 | : Pensions, Health, and Welfare ; _ oe | 18 7 Other Social Indicators - ee oe 19 Appendix Selected Economic Statistics oe | _ 21 @ 100,000 - 500,000 @ 50,000- 100,000 © 10,000 - 50,000 * Less than 10,000 me” OP ees Oe ee es ‘tet 725938 (801012) 8 92 ~ vi Latvia: An Economic Profile Geography and Climate Latvia is the “middle” Baltic state in terms of size, population, and geographic location. It is situated between Estonia and the Gulf of Riga to the north and Lithuania to the south. Russia and Belarus border Latvia to the east and the Baltic Sea lies to its west. With an area of 64,500 square kilometers (about the size of West Virginia), Latvia ranks 12th in size of the 15 former Soviet republics, larger than only Estonia, Armenia, and Moldova. Like the rest of the great northern European plain, the country is low lying with more than one-fifth of the land no more than 131 feet (40 meters) above sea level and three-quarters less than 400 feet (122 meters) in elevation. The fertile Riga-Jelgava lowland in the center of Latvia separates the western morainic hills of the Kurland region from the highlands of picturesque Livonia in the northeast and Latgale in the southeast. The countryside is very moist with numerous peat bogs and nearly 3,000 small lakes. The largest river, the Daugava, originates on the western slopes of the Valday Hills in Russia’s Tver’ Oblast, flows westward through the northern part of a Belarus, and then northwestward through 230 miles (370 kilometers) of central Latvia before emptying Downtown Riga: looking toward the Daugava River into the Gulf at the capital city of Riga, where its mouth is a mile ( 1.6 kilometers) wide. This river is The port at Riga usually freezes over in the winter, but navigable throughout Latvia, accounting for substan- the Baltic Sea ports at Liepaja and Ventspils remain tial commerce in addition to locally produced hydro- ice-free. The Baltic coast, however, consists of pine- electric power at three locations—Kegums, Stucka, and Riga. covered sand dunes and offshore shallow sand bars that are not conducive to natural harbors. As a result, Latvia’s western ports lie only at the mouth of rivers. Because of the moderating influence of the Atlantic Ocean and the Baltic Sea, Latvia enjoys less extreme Forests cover over one-third of the territory, most variations in climate than most of the European part prominently in the uplands of Kurland and Livonia. of the former USSR. Riga’s January temperatures Conifers (Scotch pine and Norway spruce) dominate, average 23 degrees Fahrenheit (— 5 degrees Centi- but in the west are scattered broadleaf forests of grade) and its July temperatures average 63 degrees Fahrenheit {17 degrees Centigrade). Cloud cover, fog, birch, ash, maple, oak, and linden. Most ot Latvia contains either poor sandy bedrock and moraine loam- high humidity, and rainfall are persistent throughout soils or acidic podzols leached of minerals by the pine the year, with an average annual rainfall of 566 millimeters (23 inches) in Riga. needles of the conifers. History and Government the highest executive body and coordinates the work Since prehistoric times, Finno-Ugric and Baltic tribes of the 16 government ministries. have inhabited the territory of present-day Latvia. Latvians are descendants of these ancient Balts, and Latvia is debating a new constitution and citizenship their relationships to the other original residents of law. The current draft of the law would grant citizen- the area, especially Lithuanians, are revealed through ship to those who were citizens before 1940 and to common linguistic roots to the Baltic group of Indo- their heirs. Others would have to fulfill a residence European languages. From the 12th century onward, requirement of 16 years, speak Latvian, take an oath Latvians have been under foreign rule. From the 14th of allegiance, and renounce previous citizenships. to the 16th century, the area was under the control of Both the constitution and the citizenship law will face the Teutonic Orders, which established a Livonian referendums with only the ethnic Latvian population state covering the territory of Latvia and parts of voting. present-day Estonia. Later on, Southern Livonia and Kourland (West Latvia) came under Polish-Lithua- Population and Labor Force nian rule until 1621, when Sweden took over Livonia. Latvia was the second least populated Soviet republic In 1721, Livonia was incorporated into Russia, fol- with 2.69 million people (1 January 1990). Its popula- lowed by Kourland’s entrance in 1795. Both provinces tion is substantially smaller than that of Finland (4.97 remained part of Russia until independence was million) and Sweden (8.53 million). Over the past achieved in 1918. decade, Latvia’s population has grown more rapidly than that of Finland or Sweden, but all three are In June 1940, the Soviet army marched into Latvia, a considered “low growth” areas (appei:dix table A-1). new government was formed, and in August the Longer life expectancy in the Nordic countries is country was annexed by the Soviet Union. With the more than offset by Latvia’s higher fertility level. As exception of the transfer of certain territories (Jaun- a result, relative to the able-bodied population in latgale and Kacanava) in 1945 to the Russian SFSR 1989, there are more children and fewer senior citi- to form Pskov Oblast, the situation remained basically zens in Latvia than in either of the Nordic countries. unchanged until June 1987 when the dissident human Perhaps as an echo effect of World War II, women rights group “Helsinki 76” demanded Latvian politi- make up 54 percent of Latvia’s population, a some- cal independence. The following year, secessionist what higher share than in the two Nordic countries. tendencies got a further boost from the formation of Table | presents a selection of key population the Latvian National Independence Movement. By characteristics. April 1990, these forces joined with reform-minded Communist Party members to form a new party. One Latvia’s population lags well behind the two Nordic month later, Latvia renewed its demand for indepen- countries in terms of mortality and life expectancy. dence from the USSR. Events subsequent to May Infant mortality, a major component of overall mortal- 1990 culminated with formal recognition of Latvia's ity in Latvia, was 11.1 per 1,000 births in 1989.’ Even new status by the Soviet State Council on 6 Septem- the understated official rate for infant mortality in ber 1991, and admission to the United Nations || Latvia is twice as high as rates for Sweden and Finland. days later. ' Because of past Soviet statistical practices, the official figures for Latvian life expectancy probably understate differences in mortal- Latvia is a parliamentary democracy. Its unicameral ity levels. Supreme Council has 20! members. The current ? Because of definitional differences, the official Latvian infant Supreme Council was elected in 1990 under Soviet mortality rate, which is an important indicator of health conditions in a country, cannot be directly compared with other countries’ rule, and elections in the newly independent Latvia rates. The reported infant mortality rates are understated in part have been postponed until 1993. The Citizens’ Con- because they do not include deaths in the first seven days after gress is a quasi-governmental structure that presents birth. Estimates for the former USSR suggest that the true rate is about twice the reported rate. The differential has not been itself as an alternative to the Supreme Council but estimated for the individual republics. lacks legislative power and popular support. The Council of Ministers, headed by the prime minister, is Latvia Finland * Sweden * 1979 1989 1979 —1 990 1979 1990 Population - a a oe oe Total (thousands) 2503) 2667 478849748318 8,527 Male 1,152 1239 2315 241” 4,120 4,212 Female 1351 = 4,428 2473s 2S 4,198 4,315 Age dependency ratios > BC 7 Total oC “« £4 35 Young (0-15) —_ :) 2 wo 29 31 28 Old (over 64) OB 20 25 28 Percent urban se ST «6 62 83 NA Total fertility rate < (birpetr hwomsan ) Do 2 7 1.7 2.0 Life expectancy (years) a 7m 70 73, 16 76 77 Largest cities (thousands) Rigas 1S Helsinki 49! Stockholm 672 Daugavpils 127 Tampere 172 Goteborg 432 @ Although the years 1979 and 1990 are indicated, the data for Nordic countries refer to a range of different dates depending on the country and measure in question. > Age dependenisc tyh e perofc thee pnopultati on that is younger and older than the working ages (15 to 64). © Total fertility rate represents the number of children a woman would bear in her life if she survived to the end of the reproductive ages and was subject over this period to the regime of age-specific fertility rates observed in the given country and year. Latvia's population is more highly urbanized than The Latvian language, whose written alphabet uses Finland’s but less urbanized than Sweden's. A much Latin characters, belongs to the Baltic group of Indo- greater portion of the population, however, lives in European languages and is one of only two surviving Riga than in either of the Nordic countries’ largest Baltic languages (Lithuanian being the other). In 1989 cities. a law designating Latvian as the official state language of the republic was passed. Currently, more In 1979 ethnic Latvians comprised 53.7 percent of the Latvians speak Russian than vice versa. As would be population as compared with 32.8 percent for Rus- expected, the share of Russian speakers increased sians. Ten years later, the Latvian share had fallen to between 1979 and 1989 (from 77 percent to 82 52 percent, while the Russian share had risen to 34 percent), while the share of Latvian speakers declined percent (appendix table A-2).’ Russian colonization by half a percentage point to 62 percent. Literacy is began in the 18th century, but the greatest migration near universal, and the population is considered well of ethnic Russians followed World War II when educated relative to the rest of the former Soviet thousands of industrial workers and military person- Union. As of the 1989 census, 60 percent of the nel arrived. population age 15 and over had completed secondary school, up from 44 percent in 1979. The share of those * Byelorussians (4.5 percent) and Ukrainians (3.4 percent) constitute with completed higher education rose from 8 percent the next largest ethnic groups with Poles, Lithuanians, and Jews to nearly 12 percent in the same period. comprising the balance of the population. Riga’s Old Town Despite the similarities in geography and climate, the distribution of the labor force in Latvia differs signifi- cantly from that in Finland and Sweden (table 2). The differences reflect not only the lower level of economic development in Latvia, but also the impact of past Percent Soviet development policy. Thus, nearly a third of Latvian workers are employed in the industrial sector, as coripared with less than one-fourth in the two Latvians Noraic countries. The share of agriculture also is Aa 52 relatively high. The small shares employed in domes- tic trade, public dining, financial institutions, and in the service sector all stem largely from such development policies. In all three countries, the size of the labor force as a percentage share of the total population is approxi- Byelorussians mately the same (table 2), but underlying characteris- 45 tics are different. First, previous Soviet policy relied Ukrainians on large annual infusions of labor as a means of 3.4 stimulating economic growth. This policy contributed Poles to high labor force participation rates relative to 23 Finland and Sweden, especially of females. In 1989, fifty-five percent of the state sector work force in Lithuanians 1.3 Latvia was female. Second, Latvia has a younger population than the two Nordic countries with one- third below age 16 compared to under 30 percent for Finland and Sweden.