Latvia’s recovery and resilience plan

RRF FUNDED PROJECTS IN LATVIA

WHAT’S IN THE PLAN?

The reforms and investments in Latvia’s plan are helping it to become more sustainable, resilient and better prepared for the challenges and opportunities of the green and digital transition. Following Council approval of Latvia’s plan on 13 July 2021, Latvia’s recovery and resilience plan was updated on 8 December 2023 also to introduce a REPowerEU chapter.

• 63 investment streams and 25 reforms
• 42% of the plan will support climate objectives 
• 23% of the plan will foster the digital transition  

The transformative impact of Latvia’s revised plan is the result of a strong combination of reforms and investments which address the country’s specific challenges. The reforms address bottlenecks to lasting and sustainable growth, while investment is targeted at the green and digital transitions, social inclusion, including healthcare, the social safety net and regional disparities. The revised plan includes key reforms focusing on health, social assistance, higher education and skills. They are expected to have a positive long-term impact on the country’s wellbeing. In particular, the plan includes ambitious reforms covering the governance and financing of higher education institutions, a new remuneration model in healthcare and the introduction of indexation of minimum income benefits. The investments included in the modified Latvia’s plan put a strong focus on boosting economic and social resilience, green and digital transition, including important investments such as the greening of the Riga transport area, the energy efficiency renovation programme, regional development measures (schools, industrial parks, roads, affordable housing) and the modernisation of hospitals.

All measures included in the modified plan have to be implemented within a tight time frame, as the Regulation establishing the Recovery and Resilience Facility requires all milestones and targets within the national plans to be completed by August 2026.

Latvia’s plan now includes a REPowerEU chapter containing measures to help address the key energy challenges that Latvia is currently facing.

The REPowerEU grant allocation amounts to €124 million. Moreover, Latvia has requested to transfer € 10.9 million from the Brexit Adjustment Reserve (BAR) to finance investments and reforms of the chapter, for a total of €135 million.

Key measures for REPowerEU

The REPowerEU measures include a reform that aims at bringing important transformation in the national energy sector by promoting energy communities and renewable energy self-consumption and self-generation. It will also contribute to optimising the use of existing distribution and transmission networks, and to improving the conditions for the uptake of sustainable biomethane.

The new investments are aimed at increasing the capacity of the electricity grid, accommodating the integration of Renewable Energy Sources (RES), and accelerating the synchronisation of the national electricity network with the Continental Europe network. The investments are also aimed at digitalising, modernising and securing electricity transmission and distribution networks, as well as at increasing the uptake of sustainable biomethane.

In the area of climate and environmental policies, Latvia’s challenges include the need to improve energy efficiency and accelerate the renovation of the building stock, to deploy sustainable and clean mobility and transport solutions, and a relatively slow roll-out of renewable energy sources to generate electricity.

Effectively, the investments and reforms in the revised plan continue to focus on clean transport, energy efficiency of private and public buildings, electricity network modernisation and flood risk reduction measures. The plan also preserves the legislative action to facilitate the deployment of onshore wind energy at national level. 

Key measures for the green transition

• The plan supports the green transition with investments to overhaul the Riga Metropolitan area transport system and to incentivise clean transport and sustainable mobility (€295 million).
• An investment stimulus of €472 million in the energy efficiency of private and public buildings, and of businesses, thanks to a large-scale renovation initiative and to financial schemes.
• Latvia’s recovery and resilience plan includes a reform which will improve the regulatory framework to facilitate the deployment of onshore wind energy and reduce legal uncertainty for investments in wind power.
• Investment to prepare the national energy grid for a higher integration of renewable energy sources and by increasing the uptake of sustainable biomethane.

As a result of the addition of the REPowerEU chapter, the modified plan has further strengthened the original focus on the green transition, now devoting 42% of the available funds to measures that support climate objectives (up from 37.6% in the original plan). This means a stimulus worth €827 million under the Recovery and Resilience Facility by 2026 for investments and reforms accelerating the green transition and fostering climate change adaptation.

Digital challenges for Latvia include improving basic digital skills, increasing the uptake of digital solutions by businesses as well as alleviating the shortage of information and communication technology specialists, which currently impacts workforce availability, competitiveness, resilience, use of government e-services and innovation alike.

Key measures for the digital transition

• Latvia’s recovery and resilience plan supports the digital transition with investments in the digitalisation of public administration and public services (€129 million).
• Measures to improve the digitalisation of small and medium sized enterprises (€125 million) support the digital transformation of businesses and create a better environment for research and innovation.
• Investments to deploy high-speed broadband shall help further improve digital infrastructure (€16.5 million).
• Reforms for digital upskilling aim at improving the basic and advanced digital skills of citizens, enterprises and public administration (€95 million).
• Investments in the digitalisation of the country's public administration and public services.
• Digital transition for businesses, including small and medium-sized enterprises, support for the development of high-tech digital products and services, and the introduction of Industry 4.0 solutions in production processes.
• Investments to deploy high-speed broadband, complemented by reforms for the digital upskilling of the country's workforce.

The modified plan has further strengthened the focus on the plan on the digital transition, devoting 23% of the available funds to measures that support digital objectives (up from 21% in the original plan).

Key challenges with an impact on Latvia’s medium-term economic performance include the resilience, accessibility, quality and cost-effectiveness of the healthcare sector, the quality and efficiency of the education system and digital skills. Latvia also faces challenges in the social field, in particular as regards the level of benefits and various social support, as well as access to affordable housing. In light of Latvia’s innovation performance gap with the rest of the EU, further efforts are needed to advance in the area of research and innovation, as well as to improve the efficiency of public administration.

Key measures in reinforcing economic and social resilience

• The plan reinforces economic and social resilience with investments in affordable housing, which should also help foster labour mobility as Latvians are often hampered by a lack of housing opportunities in the places with the best employment opportunities (€43 million).
• Other investments will modernise healthcare, by investing in hospitals and healthcare service providers to strengthen the resilience of the health sector and to increase the availability of integrated and high-quality healthcare services (€158 million).
• A higher education reform will aim at improving the governance, the accreditation mechanism and the funding principles for the higher education sector. The reform will be complemented by investments in research and academic development (€82.5 million).

Latvia’s plan is consistent with the challenges and priorities identified in the European Semester, the annual cycle of coordination and monitoring of each EU country’s economic policies. For a detailed explanation of the European Semester see the following link: The European Semester explained | European Commission (europa.eu)

DOCUMENTS