Will EU fund investments boost economic productivity?

According to the assessment of the impact of European Union (EU) funds to date, their contribution to gross domestic product (GDP) growth averages 1–1.5% per year. In this respect, Latvia is one of the most successful EU countries. Since Latvia joined the EU, the gap between Latvia and the average GDP of European countries has narrowed significantly.

From 2014 to 2020, the available EU funding of EUR 4.4 billion has been essential to Latvia’s growth and has made an invaluable contribution to increasing GDP and promoting employment.

Focus on productivity and competitiveness

In the next programming period, Latvia will focus on reforms and investments that will increase the productivity of Latvia’s economy and the competitiveness of its businesses, while continuing to transform Latvia’s economy into a knowledge-based economy. The green and digital transitions will enable Latvian businesses to develop new products and services. The contribution of the funds will help ensure that growth reaches all of Latvia’s regions and residents.

Demographic and labour-market trends show that achieving significant convergence with the living standards of the most developed countries is possible only through a major leap in economic productivity. In the context of EU fund investments, not only support for businesses but also investments in all sectors will have to be measured through the lens of productivity. To achieve this, investment in well-considered projects that generate cost savings and income is important.

Investment in six strategic development directions

For the next EU funds programming period, Latvia has set six main directions, which are also included in the National Development Plan. The first of these — a smarter Europe — envisages innovative and smart economic transformation, the development of research and skills, support for business and digitalisation, including digital connectivity. The second direction — a greener Europe — involves moving towards climate neutrality, adapting to climate change, and implementing environmental protection policies. The third — a more connected Europe — means safe, sustainable and accessible transport development. The fourth investment direction — a more social Europe — involves ensuring equal opportunities and access to education, healthcare and the labour market, as well as fair working conditions, social protection and inclusion. The fifth direction — a Europe closer to its citizens — promotes sustainable and balanced regional development. The final, sixth investment direction is support for addressing socioeconomic challenges associated with the transition to climate neutrality.

EUR 4.4 billion for the next seven years

As the start of the new EU funds period approaches, the European Council and the European Parliament approved the regulatory framework on 24 June this year, establishing the procedures for implementing the funds in 2021–2027. Overall, approximately EUR 4.4 billion in EU funds will be available for the development of Latvia’s economy over the next seven years. The responsible institutions in Latvia are already working on drafting and coordinating national legislation, and the EU funds implementation plan is expected to be approved by the government by the end of this year. Projects are provisionally scheduled to begin in mid-2022.

Author:

Ministry of Finance

fm.gov.lv