Innovation Europe > News > Innovation EU Vol2-1 > Innovation Latvia

While Latvia experienced an economic boost between 2005 and 2007, the annual GDP growth in 2008 declined from 11% to 4.6%. The EIS 2008 identifies Latvia among the catching- up group, with a performance considerably below the EU-27 average, but with an above average rate of improvement. Latvia was ranked 30th out of the 32 countries included in the EIS with its score (0.239) making only half of the EU- 27 average (0.475). So far the increase in innovation inputs (enablers) has not resulted in an accompanying growth in innovation performance.

Despite the government’s official position that all launched and prescheduled innovation support programmes will be maintained as well as the objective that GERD should reach 1.5% of GDP by 2015, the 40% cut in state budget for R&D, tax raises and the government’s indecision on introducing structural reforms even further inhibit innovative development in the country.

Compared to the EU policy mix, Latvia has a larger share of R&D and innovation support measures aimed at public research organisations and universities, but a comparatively smaller one targeting R&D co-operation, knowledge transfer and support to innovation management and advisory services, as well as direct support of business R&D and support to innovative start-ups.

Main innovation challenges

• Enhancement of innovation capacity and performance of enterprise sector.
• Maintenance and promotion of qualified workforce.
• Facilitation and intensification of scienceindustry co-operation.

Conclusion

In terms of policy design, the major opportunity for Latvia lies in capitalising on the complementary competencies possessed by players in the national innovation system and ensuring their synergies in future policy-making in the field of R&D and innovation.

There have been substantial reallocations of financial resources between various policy measures in Latvia in response to the needs specifically brought forward by the economic crisis. It is highly important to also ensure continuity of established and well-functioning schemes and policy lines, a systemic approach as well as a strategic long-term vision in terms of policy planning and addressing the identified systemic challenges.

Tax incentives as a non-financial instrument for the promotion of innovation, so far unused in Latvia, are still to be taken advantage of. The recent economic trends and market developments shape the current opportunities and threats for further development in Latvia, especially under the tight budget that requires strategic prioritisation of actions and funding allocations.

The frequent changes and mutual rivalry of political players even more acutely determine the need for adopting a national-level policy document that would ensure the succession and consistency of the economic and innovation policy irrespective of the particular political situation in the country.