Economist: Latvia's exports are simpler than Estonia's and Lithuania's

Bank of Latvia economist Oļegs Krasnopjorovs has addressed, on the website Makroekonomika.lv, the question of why Latvia's economy lags behind neighboring Estonia and Lithuania in development. His analysis centers on the complexity of export structures.

Exporting simpler goods

According to the economist, Latvia exports comparatively simpler products than other European Union neighboring countries. This matters because long-term economic development is fundamentally built on the ability to produce and export increasingly sophisticated, higher-complexity goods.

Why it matters

The concept of economic complexity is often used to explain why some countries grow faster than others: the more complex and higher value-added goods a country is able to produce, the greater its potential for sustainable growth. Krasnopjorovs' observation suggests that Latvia's economic structure lags behind Estonia's and Lithuania's in this respect, which could be one of the factors behind these neighboring countries' faster economic growth in recent years.

The analysis points to the need for Latvia to improve its export structure by shifting toward the production and export of more complex, higher value-added products in order to catch up with its neighbors.