Latvia's unemployment rate could fall to 5% by 2040, ministry projects
The Economy Ministry's long-term forecast expects Latvia's unemployment rate to drop from 6.9% this year to 5.6% by 2030 and around 5% by 2040, though an aging population and skills shortages will keep the labor market tight.
Latvia's Ministry of Economics (EM) has released a long-term labor market forecast through 2040, projecting a gradual decline in unemployment. The rate, currently 6.9% in 2025, is expected to fall to 5.6% by 2030 and to roughly 5% by 2040 — a level close to what the ministry considers the natural rate of unemployment.
The forecast is based on a target scenario tied to the government's goal of doubling Latvia's GDP by 2035. It assumes average annual economic growth of 3.8% through 2030 and 4.2% between 2031 and 2040, driven mainly by rising productivity linked to technology adoption, digitalization and wider use of artificial intelligence.
Demographics will reshape the labor market
The ministry expects Latvia's population to shrink to about 1.75 million by 2040, a decline of nearly 95,000 from current levels. The working-age population will see the steepest drop — about 108,000 people, or 9.4% — while the number of residents over 64 will grow by roughly 62,000.
These trends will keep the labor market tight, making it harder for employers to find suitably qualified staff. The highest unemployment risk will remain among people with low education levels and those living farther from economic centers.
New jobs and shifting skill demands
In the medium term, most new jobs are expected in construction and commercial services — about 30,000 combined by 2030, offsetting losses in sectors such as retail. Over the longer term, demand will increasingly shift toward highly skilled professions, whose share of total labor demand could reach 51.3% by 2040.
The ministry also notes that workforce aging could free up about 243,500 jobs by 2040, mostly in high- and medium-skill occupations. Wider adoption of artificial intelligence will continue to boost productivity but is not expected to significantly change the overall number of jobs.
