Latvia may be on the verge of a new growth cycle, economist suggests
Economist Arnolds Antanavičs argues that Latvia, long lagging behind Lithuania and Estonia, is now at the start of a growth cycle, evidenced by rising foreign investment and a recovering housing market.
According to economist Arnolds Antanavičs, the economic dynamics in the Baltic states are shifting. For years, Lithuania outpaced Latvia, driven by a larger money supply (M1 indicator: Lithuania €45 billion vs. Latvia €20 billion) and an influx of Belarusian and Ukrainian companies after the war in Ukraine. For example, game developer Wargaming moved from Minsk to Vilnius, bringing hundreds of skilled workers and boosting demand for housing and office space.
However, the cycle is turning. Vilnius has become one of the most expensive cities in the Baltics, with prime property prices reaching €12,000-13,000 per square meter and apartments costing up to €3-4 million. In contrast, Riga's largest apartment deal last year was €1.6 million. High living costs have prompted companies like Continental to close a plant in Kaunas.
Latvia, which suffered from capital outflows due to sanctions on Russia, is now becoming more attractive. Last year, the country attracted over €1 billion in foreign direct investment for the first time. Mortgage lending is also picking up: new housing loans rose 14.3% in the first five months of this year and nearly 40% in 2025. This indicates growing consumer confidence.
Antanavičs believes Latvia is at the beginning of a growth cycle with higher potential. Riga offers cheaper housing and lower business costs, and Lithuanian capital is already flowing into Latvian real estate projects. If trends continue, the real estate sector could become a key driver of economic growth in Latvia.
