Latvia's Economic and Financial Outlook
Pension Reform Underpins Stability of Public Finances
Latvia is well positioned to withstand fiscal challenges arising from an ageing population.
Age-related Spending, Projected Change (2016-2070, % GDP)
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Latvia's Pension System And Recent Reforms
Latvia's reformed pension system consists of three tiers:
1. state compulsory unfunded pension scheme (the 1st tier)
2. state funded pension scheme (the 2nd tier)
3. private voluntary pension scheme (the 3rd tier)
In 2012, measures were introduced to address long-term sustainability:
starting with 2014 retirement age is gradually increased by 3 months each
year until it reaches 65 years in 2025
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minimum contribution period to secure full pension was increased from 10 to
15 years starting from 2014 and up to 20 years starting from 2025
contributions to the funded, e.g. 2nd tier, pension scheme increased from 2%
to 4% in 2013, to 5% in 2015, and to 6% in 2016
Source: The State Social Insurance Agency
The 2nd Tier Pension Net Assets (EUR billion, % GDP)
France
AA/Aa2/AA
-1.4
Latvia
A/A3/A-
Estonia
Finland
Austria
Belgium
Czech
AA-/A1/AA AA+/Aa1/AA+ AA+/Aa1/AA+ AA/Aa3/AA- AA-/A1/AA-
Source: European Commission Ageing Report, May 2018
Latvia's age-related spending is among the lowest in EU
(2016, % GDP)
12.1%
12.2%
11.0%
9.6%
3.6
8.5%
3.3
7.4%
6.7%
2.8
6.1%
23
2.3
2.0
1.7
1.5
1.2
16.4
2011
2012
2013
2014
2015
2016
2017
2018
Latvia
A/A3/A-
Czech
Estonia
Belgium
Austria
Finland
France
AA-/A1/AA- AA-/A1/AA- AA/Aa3/AA- AA+/Aa1/AA+ AA+/Aa1/AA+ AA/Aa2/AA
2nd tier pension net assets (EUR billion)
2nd tier pension net assets (% of GDP)
Source: Financial and Capital Markets Commission, Central Statistical Bureau of Latvia
Source: European Commission Ageing Report, May 2018
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