Latvia Economic and Fiscal Outlook

7 KEY STRENGTHS AND CURRENT CHALLENGES OF LATVIA 1 Strengths Flexible and resilient economy with strong recovery prospects Mitigate the impact of higher 2 Investment and export driven economic growth 3 Prudent fiscal management in pre-COVID years providing fiscal capacity to absorb external shocks energy prices on the most vulnerable 4 5 6 Well-capitalized and liquid banking sector, with tight AML/CFT regime Good progress made to diversify sources of energy supply and ensure energy security. Limited energy dependence from Russia NATO membership provides a security guarantee and defence co-operation to defer potential external aggression Structural transformation of the economy (inc.EU funds, Recovery and Resilience plan) Challenges Inflation Defence Increase the military and defence capabilities as part of NATO membership Economic growth Energy security Decrease energy dependency from Russia

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