COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Latvia Accompanying the document Proposal for a COUNCIL IMPLEMENTING DECISION on the approval of the assessment of the recovery and resilience plan for Latvia
Date: 2021-07-02
Institutions: European Commission, Secretariat-General
Subjects: EU aid, Latvia, coronavirus disease, economic and social cohesion, economic recovery, economic reform, epidemic, investment, structural adjustment

EUROPEAN 
COMMISSION 

Brussels, 2.7.2021  
SWD(2021) 162 final/2 

This document corrects document SWD(2021)162 final of 22.6.2021. 

The page numbers in the table of contents have been updated. 

COMMISSION STAFF WORKING DOCUMENT 

Analysis of the recovery and resilience plan of Latvia 

Accompanying the document 

Proposal for a COUNCIL IMPLEMENTING DECISION 

on the approval of the assessment of the recovery and resilience plan for Latvia 

{COM(2021) 340 final} 

EN 

  EN 

 
 
 
 
 
 
Table of contents 
1. 

Executive summary ............................................................................................................................... 2 

2.  Recovery and resilience challenges: scene‐setter ................................................................................. 5 

2.1.  Macroeconomic outlook and developments since the 2020 country report ............................... 5 

2.2. 
Challenges related to sustainable growth, cohesion, resilience and policies for the next 
generation ................................................................................................................................................. 8 

2.3. 

Challenges related to the green and digital transition ................................................................ 12 

2.3.1. Green dimension ....................................................................................................................... 12 

2.3.2. Digital dimension ....................................................................................................................... 15 

3.  Objectives, structure and governance of the plan .............................................................................. 18 

3.1.  Overall strategy of the plan ......................................................................................................... 18 

3.2. 

Implementation aspects of the plan ........................................................................................... 21 

4. 

Summary of the assessment of the plan ............................................................................................. 24 

4.1. 

Comprehensive and adequately balanced response to the economic and social situation ....... 24 

4.2. 

Link with country‐specific recommendations and the European Semester ............................... 29 

4.3.  Growth potential, job creation, economic, institutional and social resilience, European Pillar of 
Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence ...... 37 

4.4. 

The principle of ‘do no significant harm’ ..................................................................................... 44 

4.5.  Green transition .......................................................................................................................... 46 

4.6. 

Digital transition .......................................................................................................................... 48 

4.7. 

Lasting impact of the plan ........................................................................................................... 51 

4.8.  Milestones, targets, monitoring and implementation ................................................................ 54 

4.9. 

Costing ......................................................................................................................................... 56 

4.10.  Controls and audit ....................................................................................................................... 58 

4.11.  Coherence ................................................................................................................................... 60 

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1.  EXECUTIVE SUMMARY  

Latvia’s  economy  stood  up  to  the  COVID-19  crisis  relatively  well  with  a  sharp  decline 
counterbalanced by a robust recovery. However, achieving a sustainable growth path will be 
more challenging. Latvia’s GDP contracted by 3.6% in 2020 due to COVID-19 pandemic-related 
restrictions. After the initial shock in the second quarter of 2020, the economy rebounded strongly 
during  the  rest  of  the  year.  The  economy  declined  again  in  the  1st  quarter  of  2021due  to  the 
measures aimed at containing the second wave of the pandemic, however, the setback is expected 
to  be  temporary.  A  significant  easing  of  measures  in  the  second  half  of  2021  should  help  the 
economy recover, to reach a growth rate of 3.5% overall in 2021. The momentum is expected to 
carry  into  2022,  when  GDP  growth  is  projected  to  reach  5.6%  driven  by  buoyant  private 
consumption and investments.  Over the medium term, Latvia’s growth prospects will depend on 
its ability to counter the pre-crisis trend of falling labour supply. Employment decline in 2020 has 
been mitigated thanks to the deployment of furlough schemes, which incentivized businesses to 
keep people in employment. The number of people employed declined by 2.3% in 2020 with the 
unemployment rate reaching 8.3% from 6.3% in 2019. However, the recovery in employment is 
expected to lag GDP growth somewhat, with the unemployment rate seeing a more pronounced 
improvement  only  in  2022.  Low-wage  earners  working  in  the  services  sector  have  been 
disproportionally affected by the crisis, further widening the already existing disparities in income 
level and adequacy of social protection.  

Government support to employees and businesses was prompt during the first wave of the 
pandemic, but faced some delays during the second wave. At the outset of the crisis, Latvia 
promptly deployed support for businesses and people affected by the crisis and dedicated additional 
resources to the health sector. As a result, the government deficit increased to 4.5% in 2020 and is 
expected to reach 7.3% in 2021. The deficit is expected to decline rapidly in 2022, however, as 
support measures are being phased out. Government debt is projected to increase by almost 10 pps. 
by the end of 2022 compared to 2019.   

Latvia submitted its Recovery and Resilience plan on 30 April 20211. Latvia’s plan consists of 
6  components,  covering  a  broad  range  of  policy  areas  and  aims  to  address  the  country’s  key 
challenges with a balanced set of reforms and investments. The key areas for investments are the 
twin  transitions,  health  infrastructure,  social  and  regional  infrastructure  as  well  as  research  and 
innovation.  The  measures  include  direct  investments  in  public  infrastructure,  capacities  and 
processes as well as extensive support programmes for private investment in the twin transitions 
and innovation. The investments are accompanied by reforms that will make them more effective 
at achieving their intended policy goals and by helping to attract private investments for bigger 
impact.  In  addition,  Latvia’s  plan  includes  a  few  self-standing  reforms  that  aim  to  address 
challenges in areas that have been prominently identified in the Country Specific recommendations 
–  tax  administration,  the  judicial  system,  the  capacity  of  the  public  administration  and  public 
procurement. Latvia requested EUR 1.826 billion and no loans. 

The plan includes measures addressing all key challenges, constituting an adequate response 
to the economic and social situation and is expected to strengthen Latvia’s growth potential. 
The  challenges  identified  in  the  most  recent  Country-Specific  recommendations  pertain  to  six 

1 Latvia submitted its National Reform Programme on 14 April 2021. The information provided in the National Reform 
Programme is being considered and jointly assessed in this Staff Working Document together with the Recovery and 
Resilience Plan. 

2 

 
 
                                                            
broad policy areas – fiscal and financial challenges, challenges related to social inclusion and skills, 
challenges related to productivity growth and convergence, challenges related to the efficiency and 
accountability  of  public  administration,  as  well  as  challenges  related  to  the  twin  transitions. 
Latvia’s plan contributes to effectively addressing a significant subset of challenges identified in 
the  country  specific  recommendations.  Moreover,  by  contributing  to  effectively  addressing 
Latvia’s key economic and social challenges identified in the country-specific recommendations, 
the plan presents a comprehensive and adequately balanced response to the economic and social 
situation, thereby contributing appropriately to all six pillars referred to in Article 3 of the RRF 
Regulation. 

The plan proposes significant reforms in health, social inclusion, higher education and skills. 
The plan’s most ambitious measures are related to the reform of governance and financing of higher 
education institutions, the preparation of a comprehensive human resources strategy in healthcare, 
and  the  introduction  of  annual  indexation  of  minimum  income  benefits.  These  measures  are 
expected to have a lasting impact and to contribute significantly to addressing challenges in higher 
education, health and social inclusion. 

Investments in green and digital infrastructure, regional development, as well as extensive 
support schemes for business investment is expected to bolster Latvia’s growth potential over 
the medium to long term. Investments and accompanying reforms to the Riga transport system 
are  expected  to  boost  the  city’s  competitiveness  and  ability  to  attract  investments  and  talent. 
Measures to foster private investments in wind energy are set to contribute to reaching renewable 
energy  targets  and  becoming  a  competitive  low-carbon  economy.  Business  investment  support 
schemes are set to accelerate Latvia’s pursuit of higher export capacity and productivity growth. 
Investments in housing and infrastructure for peripheral regions are expected to strengthen Latvia’s 
lagging  regions’  growth  opportunities.  Altogether,  these  measures  address  long-standing 
challenges of Latvia’s economy – low innovation spending, low uptake of modern technologies as 
well as significant regional disparities.  

Latvia’s recovery and resilience plan is compliant with the ‘do no significant harm’ principle. 
The assessment follows the methodology set out in the Commission’s Technical guidance on the 
application  of  ‘do  no  significant  harm’  under  the  Recovery  and  Resilience  Facility  Regulation 
(2021/C 58/01) and the six corresponding environmental objectives. Where necessary, respect of 
the ‘do no significant harm’ principle is ensured by milestones.   

Reforms and investments in clean transport, energy efficiency and climate adaptation, as well 
as reforms fostering investment in renewable energy will address Latvia’s climate challenges. 
Latvia’s  main  green  climate  transition  challenges  are  to  reverse  the  trend  of  growing  energy 
consumption in transport and buildings as well as to continue increasing the share of renewable 
energy in its energy consumption. The greening of Riga metropolitan transport system is expected 
to  contribute  to  increasing  the  renewable  energy  share,  reducing  energy  consumption  and 
greenhouse  gas  emissions  in  transport  sector  through  making  public  transport  a  more  attractive 
option for commuting. Investments in energy efficiency of public and residential buildings will 
contribute  to  the  achievement  of  Latvia’s  energy  efficiency  target  for  2030.  Investments  in  the 
electricity  network  aimed  at  facilitating  the  development  of  self-generation  and  extending  the 
electric charging infrastructure to densely populated areas will help promote renewable energy use 
both  in  housing  and  transport  sectors.  Moreover,  Latvia  aims  to  remove  barriers  to  private 
investments in wind energy, which is crucial to Latvia’s ability to reach its 2030 renewable energy 
target. Furthermore, a support instrument to businesses will support a variety of green investments, 
including renewable energy, energy efficiency and green R&D. Finally, greening of Riga transport 

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system and investments in a new customs control post are expected to yield improvements in air 
quality thus contributing to environmental objectives. Altogether, Latvia’s plan dedicates 37.6% 
of the available funding to climate-related investments.  

Latvia’s plan addresses its key digital challenges – poor skills, insufficient rural connectivity 
and  low  level  of  business  digitalisation.  Poor  basic  digital  skills  among  the  working  age 
population,  insufficient  uptake  of  digital  solutions  by  businesses  as  well  as  a  shortage  of  ICT 
specialists  are  Latvia’s  key  digital  challenges,  negatively  affecting  workforce  availability, 
competitiveness,  business  digitalisation,  use  of  government  e-services  and  digital  innovation. 
Significant reforms and investments are planned to address the country-specific recommendations 
in this area. The measures supporting digital objectives account for an amount which represents 
21% of the plan’s total allocation. The plan includes sizeable investments in basic and advanced 
digital skills to foster Latvia’s digital transition. Latvia’s plan also includes measures for the digital 
modernisation of public administration and the digital transformation of public services, including 
centralised  public  solutions.  Latvia  addresses  the  challenge  also  by  supporting  the  digital 
transformation of businesses, in particular SMEs and R&D as well as by creating the necessary 
framework for Latvia’s participation in the network of European of Digital Innovation Hubs. The 
plan includes measures to deploy very high-speed broadband that will help further improve the 
digital infrastructure. 

Investments  in  human  capital,  digital  capacities,  research  and  innovation  capacity,  and 
public  transport  are  expected  to  have  the  largest  impact  on  the  economy’s  long-term 
potential.  Latvia’s  plan  includes  investments  and  reforms  aimed  at  improving  skills.  The 
importance of this is reflected by the high unemployment rate differential between the high and the 
low skilled. There has also been a recurring trend of shortages of qualified workforce and tight 
labour  supply,  aggravated  by  aging  and  declining  population  and  emigration.  A  structural 
improvement  in  the  skills  composition  has  the  potential  to  boost  the  use  of  digital  solutions, 
services, exports and to spur regional development. Furthermore, investments in modernising the 
public IT infrastructure, support for business digitalisation as well as investments in 5G should lead 
to synergies that will help increase the country’s capacity for use of digital solutions. Support for 
private R&D investments are aimed at creating sustainable innovation ecosystems that are expected 
to boost Latvia’s innovation capacity in the long term. Finally, the reform of the governance of the 
Riga  metro  area  public  transport  system  as  well  as  its  associated  investments  are  aimed  at 
improving public transport’s attractiveness and achieve a higher proportion of mobility needs being 
served by public transport. If successfully implemented, the measures will improve Latvia’s growth 
potential,  and  economic  and  social  resilience  in  the  medium  term,  and  facilitate  the  green  and 
digital  transitions.  The  stakeholder  consultation  process  was  overall  adequate,  enhancing  the 
ownership of stakeholders and supporting the lasting impact of the measures.  

Latvia has provided estimates of the total costs of the recovery and resilience plan which are 
to  a  medium  extent  reasonable  and  broadly  plausible.  Latvia  has  provided  individual  cost 
estimates for all investments included in the plan. The cost breakdown is generally detailed and 
well-substantiated. The estimates are based on comparisons with past investments of similar nature 
and on market and price analysis. While Latvia did not provide an independent validation for the 
cost estimates proposed, the assessment of the cost estimates and inherent supporting documents 
show that most of the costs are well justified and reasonable. The amounts proposed for financing 
were deemed appropriate and seen as establishing the plausibility of the cost estimates to a medium 
extent. Although the costs of most measures are deemed highly plausible that is the amount asked 
for is in the low to medium range compared to costs of similar reforms or investments, there are a 
limited set of measures for which the costing is deemed to be plausible to a low extent. Finally, the 
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estimated total cost of the recovery and resilience plan is in line with the principle of cost-efficiency 
and is commensurate to the expected national economic and social impact.  

The  individual  components  provide  clear  information  about  additional  investments  from 
other EU funds. Projects funded by other EU sources are demarcated in time and scope from the 
projects  in  the  RRP.  Furthermore,  Latvia  has  put  in  place  arrangements  to  avoid  double  EU 
funding.  

The arrangements proposed in the recovery and resilience plan are adequate to ensure its 
effective monitoring and implementation, including the envisaged timetable, milestones and 
targets, and the related indicators. The Ministry of Finance will be tasked with monitoring of 
the plan, whereas line ministries will be responsible for its implementation. The milestones and 
targets are realistic and relevant, but monitoring mechanisms are not always mentioned. The targets 
and milestones are robust, but tend to be back loaded in the cases of infrastructure investment and 
support schemes for business investment. The control system and arrangements proposed in the 
recovery  and  resilience  plan  are  based  on  robust  processes  and  structures  used  in  the  existing 
Cohesion  Policy  framework.  The  plan  clearly  identifies  responsible  actors  for  carrying  out  the 
internal  control  tasks.  The  functions  are  appropriately  segregated  and  the  arrangements  for  the 
collection and publication of data on final recipients are adequate.  

The Latvian recovery and resilience plan is coherent, with consistent, mutually reinforcing 
reforms and investments, and synergies between the different components. The recovery and 
resilience plan contains measures for the implementation of reforms and public investment projects 
that  represent  coherent  actions.  The  six  components  structure  the  investments  and  reforms  and 
show their thematic relation and interlinkages well. Coherence is ensured within the components, 
with investments accompanying relevant reforms, as well as between the different components in 
the plan. The components included in the RRP of Latvia form a single framework for reforms and 
investments,  the  core  task  of  which  is  to  promote  productivity,  reduce  inequalities,  as  well  as 
promote  the  climate  transition  and  digital  transformation.  The  six  components  are  mutually 
reinforcing and coherent in their aims.    

Table 1: Summary of the assessment of the Plan under the RRF criteria 

(2) 
 CSRs 

(3) 

Growth, 
jobs… 

(4) 
 DNSH 

(5) 
 Green 
target 

(6) 
 Digital 
target 

(7) 
 Lasting 
impact 

(8) 

(9) 
 Costing 

Mileston
es & 
Targets 

(10) 
 Control 
Systems 

(11) 

Coheren
ce 

A 

A 

A 

A 

A 

A  

A 

B 

A 

A  

(1) 

Balance
d 
Respons
e 
A  

2.  RECOVERY AND RESILIENCE CHALLENGES: SCENE-SETTER 

2.1. Macroeconomic outlook and developments since the 2020 country report  

Macroeconomic developments since the 2020 country report  

The  Latvian  economy  shrank  by  3.6%  in  2020,  in  the  wake  of  the  COVID-19  crisis.  In 
particular, the first two quarters of 2020 saw a significant fall in output due to restrictions. The 
economy mounted a strong recovery in the third quarter before slowing at the end of the year amid 
renewed  restrictions  in  response  to  the  second  wave  of  infections.  Demand  for  household 

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consumption and exports saw the largest decline as consumers stayed home and travel restrictions 
made  exports  of  services  more  difficult.  Investments  held  up  better  than  initially  expected, 
remaining at the 2019 level, largely helped by the construction sector’s continued activity during 
the first wave of the pandemic.  

Employment  held  up  better  than  GDP,  thanks  to  furlough  schemes.  The  average 
unemployment  rate  increased  by  1.8  pps.  in  2020  compared  to  2019.  The  unemployment  rate 
increased significantly in the first half of the year before decreasing somewhat during the summer 
and  early  autumn.  However,  the  second  wave  of  the  pandemic  reversed  this  trend  and  the 
unemployment rate started to increase again in December. Most jobs were lost in sectors directly 
affected  by  restrictive  measures  –  hospitality,  catering,  transport  and  other  service  sectors. 
Moreover, the job losses mostly affected low-wage earners. As a result, wage growth slowed only 
marginally compared to its pre-crisis pace, recording 5.3% growth in 2020. It is estimated that the 
emergency measures to protect incomes during the COVID-19 crisis, together with the pre-existing 
tax-benefit system, cushioned about 78% of the shock on household incomes in Latvia, almost half 
of the effect due to furlough schemes2. 

Social conditions were improving before the COVID-19 crisis, thanks to an improving labour 
market, but the COVID-19 crisis is likely to exacerbate the pre-existing inequalities. Poverty 
declined noticeably since its peak in 2011, with the share of people at in poverty rate declining by 
more than 10 pps. This is largely attributable to the continuous improvement of the labour market. 
Inequality, on the other hand, has largely remained steady over the past 10 years.  The share of 
people at risk of poverty or social exclusion fell slightly from 28.4% in 2018 to 27.3% in 2019, but 
remained among the highest in the EU. 

Macroeconomic outlook   

The  macroeconomic  scenario  included  in  Latvia’s  Recovery  and  Resilience  plan  (RRP) 
expects GDP to rebound, reaching 3.0% growth in 2021. The scenario assumes the restrictions 
related to the pandemic will be lifted in the second part of the year, giving a boost to the private 
consumption and exports. In 2022, the scenario expects GDP growth to reach 4.5% as investments 
take over as the main growth driver. Growth is expected to moderate thereafter at around 2.8%.  

Compared with the macroeconomic scenario of the Latvian government, the Commission forecast 
is  somewhat  more  optimistic  for  both  2021  and  2022  due  to  differences  in  the  appraisal  of 
government support measures for 2021 and inflow of EU funded investments for 2022. Latvia’s 
forecast dates back to early February when part of the support measures for 2021 had not yet been 
announced and there was less clarity about the timeline of both the RRF investments and other EU-
funded investments. According to the Commission’s forecast, inflation is set to recover from a near 
standstill in 2020 to 1.7% in 2021 and 2.0% in 2022.   

Employment is expected to follow a similar path to economic growth. The unemployment rate 
is expected to decline towards the end of 2021 thanks to the jobs gained in the second part of the 
year when most services hit by pandemic restrictions are expected to reopen. The unemployment 

2 See Christl, M, De Poli, S., Figari, F., Hufkens, T., Leventi, C., Papini, A. and Tumino, A. (2021) “The cushioning 
effect of fiscal policy in the EU during the COVID-19 pandemic”, JRC Working Papers on Taxation and Structural 
Reforms, 02/2021 (forthcoming); and Almeida, V., Barrios, S., Christl, M., De Poli, S., Tumino, A., Van der Wielen, 
W. (2020): ‘Households´ income and the cushioning effect of fiscal policy measures during the Great Lockdown’, 
JRC Working Paper on Taxation and Structural Reforms, 06/2020, available at 
https://ec.europa.eu/jrc/sites/jrcsh/files/jrc121598.pdf. 

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rate is set to decline further in 2022, reaching 6.9%. The tightening of the labour market is expected 
to lead to increased pressure on wage growth, which is expected to remain modest in 2021.  

The budget deficit increased to 4.5% of GDP in 2020 and is expected to increase to 7.3% of 
GDP  in 2021 before declining sharply  in  2022. The government deficit increased from 0.6% 
in 2019 to 4.5% of GDP in 2020. The sharp worsening reflects the drop in tax revenue, in line with 
the decline in consumption, the loss of jobs, and the impact of temporary support measures for 
households and businesses. The government deficit is projected to further increase to almost 7¼% 
of  GDP  in  2021  due  to  temporary  support  measures,  before  narrowing  to  2%  by  2022.  The 
government debt-to-GDP ratio increased from 37% in 2019 to almost 43.5% in 2020. The debt-to-
GDP ratio is expected to reach around 47% in 2021, but to decline in 2022, on the back of the lower 
fiscal deficit and the rebound in GDP. The 2020 Debt Sustainability Monitor projects debt to peak 
in 2026 at slightly below 50% of GDP before resuming to decline. Hence, Latvia’s fiscal policy 
remains on a sustainable path at the beginning of 2021.  

A delay in the COVID-19 vaccination strategy is considered to be the main negative risk to 
the  macroeconomic  scenario. The macroeconomic scenario included in Latvia’s plan assumes 
that the government’s target of 70% of the adult population having been vaccinated by the end of 
summer will be met, allowing for a return to close to unrestricted economic activity by that time. 
However,  vaccine  availability  and  vaccination  rollout  may  slow,  leading  to  delayed  easing  of 
restrictions. On the positive side, Latvia’s scenario does not account for the full range of support 
measures for 2021 and its forecast of EU-funded investments for 2022 is markedly cautious.  

Table 2: Comparison of macroeconomic developments and forecasts 

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2.2. Challenges related to sustainable growth, cohesion, resilience and policies for the next 

generation  

Smart, sustainable and inclusive growth 

Strong economic and fiscal fundamentals enabled Latvia to provide necessary support to the 
economy, but challenges related to the social safety of vulnerable groups have become more 
apparent. The COVID-19 pandemic had a significant impact on economic activity and business 
sentiment. The government reacted swiftly to the challenges posed by the COVID-19 crisis and 
adopted a support package to ensure the necessary liquidity for businesses and income support for 
households. The support made available in 2020 to businesses and citizens amounted to EUR 1.3 
billion,  or  4.5  %  of  GDP.  However,  the  support  granted  turned  out  to  be  lower  than  initially 
expected. This was partly due to strict eligibility conditions and the relatively high prevalence of 
envelope wages among the groups most severely affected by the crisis. This experience highlighted 
the interlinked challenges of the shadow economy and social safety nets.  

Latvia’s main economic objective remains to ensure steady income convergence with the EU 
average. In 2020 Latvia’s income per capita declined by 3% compared to 2019, however, over a 
5-year period it had increased by a 12%. Yet in 2019 it stood at only 69% of the EU average in 
purchasing parity standards. The income difference compared to the richer EU countries remaining 
a powerful driver of emigration. Therefore, continued convergence remains Latvia’s key challenge 
in terms of improving its population’s living standards. However, a number of structural issues 
raise concern about sustained convergence: firstly, the country’s declining population weighs on 
the sustainability of social systems, shrinks the domestic market and raises infrastructure costs per 
capita.  Secondly,  the  high  share  of  the  shadow  economy  holds  back  fair  competition,  weakens 
affected  workers’  social  protection  and  increases  occupational  risks.  It  is  also  among  the  main 
reasons for lacklustre credit growth. The lack of affordable housing also inhibits internal labour 
mobility. Finally, Latvia’s innovation performance is relatively low and stagnating. 

Latvia’s fiscal position remains strong and sustainable, but poor tax compliance persists and 
there are insufficient resources for critical public services. Strong growth and a prudent fiscal 
policy helped Latvia maintain its debt level at sustainable levels – 43.5% of GDP at the end of 
2020. Moreover, Latvia’s pension and health systems do not pose a fiscal challenge in the long 
term.  However,  Latvia’s  tax  revenue  as  a  share  of  GDP  remains  among  the  lowest  in  the  EU, 
limiting  its  redistributive  power  to  improve  critical  public  services  like  healthcare  and  social 
assistance.  Furthermore,  weak  tax  compliance  has  been  a  long-running  issue  in  Latvia,  with 
undeclared transactions, envelope wages, undeclared income and tax fraud all being part of the 
problem.   

There are difficulties in ensuring that growth benefits all parts of society. Inequality remains 
high  and  peripheral  regions  are  lagging  behind  the  Riga  region.  The  divergent  population 
dynamics,  with  a  growing  population  in  the  Riga  metropolitan  area  and  a  rapidly  declining 
population in the rest of Latvia, have created challenges for the quality of service delivery across 
regions, as well as the quality of the public administration at municipal level. 

Latvia’s labour force is declining, while employment conditions differ across regions and skill 
levels.  There  is  a  shortage  of  skilled  workers,  especially  in  STEM  (science,  technology, 
engineering, mathematics) sectors. Meanwhile, low-skilled, older workers, ethnic minorities and 
those living further away from the regional centres have more limited access to the labour market. 
As only a small share of the unemployed register with the public employment service, many cannot 
be reached with upskilling, reskilling and job search measures. The delivery and composition of 
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active  labour  market  measures  have  to  be  strengthened  and  adapted  to  mitigate  the  impact  of 
COVID-19  crisis.  Job  opportunities  are  concentrated  in  urban  centres,  while  labour  mobility  is 
hampered by the lack of affordable housing and limited transport connections. Furthermore, social 
partners' capacity remains limited, restricting their engagement to reinforce equal opportunities and 
jobs for all and deliver on the European Pillar of Social Rights. 

Research  and  innovation  in  Latvia  has  still  an  ample  scope  in  developing  its  potential  to 
contribute to the diversification and competitiveness of the economy. With an R&D intensity 
of  0.64%  of  GDP,  the  R&I  system  is  hindered  by  underfunding,  making  it  less  attractive  to 
researchers. Human capital imbalances represent a significant bottleneck of the Latvian research 
and innovation landscape and are evident in the current shortage of R&D personnel and skills, both 
in the private and public sectors. Research-industry and intra-industry links remain key challenges. 
In spite of the recent advances in the development of a technology-oriented start-up ecosystem, 
Latvia lags behind other EU Member States in terms of the innovative capacity of start-ups and 
SMEs. 

Social and territorial cohesion  

Regional economic and social disparities remain among the widest in the EU. While Riga’s 
GDP per capita reached 91% of the EU average in 2018, in the Latgale region in the east of the 
country it was only 25%. Population is decreasing in all regions of Latvia (NUTS3) due to natural 
change and migration, except for the Pieriga region where numbers are on the rise. The Latgale 
region has the highest unemployment rate, the highest risk of poverty, the lowest wages and the 
lowest economic activity in the country, it is also experiencing the most rapid depopulation.  

The quality of public services varies considerably among Latvian regions. The shortages of 
health and social workers outside Riga restrict access to quality care. Ensuring inclusive and quality 
education for all remains a challenge for smaller rural schools. Private housing conditions in rural 
areas are worse than in urban areas. Some regions outside the Riga metropolitan area still struggle 
with providing utilities like central sewerage and water. The road network is of low quality with 
poor public transport connections.  

In 2020, Latvia adopted an administrative-territorial reform that significantly reduces the 
number  of  municipalities.  Its  aim  is  to  consolidate  local  authorities’  administrative  capacity, 
improving their services and governance, allowing for better planning and cost savings. However, 
the  municipalities  will  need  reforms  and  investments  to  ensure  that  quality  public  services  are 
accessible to all, including to those living further away from the new administrative centres.  

Latvia is lagging behind in the completion of the TEN-T conventional rail core network. The 
main TEN-T corridor railway infrastructure (the Rail Baltica railway corridor connecting the Baltic 
States to the standard-gauge European network) is not yet in place, but construction has started. 
Only 14% of railway lines are electrified. A projected decline in international rail freight transport 
will force a shift from freight to more passenger rail services. Multimodal transfer points between 
Rail Baltica and national and regional transport networks need to be developed. 

9 

 
 
 
 
Health, economic, social and institutional resilience  

Weak  health  outcomes  are  linked  to  poor  lifestyle  choices  and  an  under-resourced  health 
system. Their effect on the health status of the population impacts negatively on labour supply and 
Latvia’s growth potential too. Many of the challenges in the sector – workforce shortages, lack of 
timely access to affordable health and long-term care, and limited disease prevention – are linked 
to low public financing. Latvia spent around 3.7% of GDP on healthcare in 2019, the second lowest 
ratio in the EU. Access to publicly funded healthcare services is limited by a quota system and lack 
of health workforce; this has led to a high level of unmet needs and a high prevalence of out-of-
pocket payments. Moreover, the quality and efficiency of service delivery is uneven, with service 
delivery focused more on hospital care (which is more expensive) and less on the use of home care 
and  community-based  services.  Whilst  the  intensive  care  capacity  has  increased  during  the 
COVID-19 pandemic, the Latvian health system has still come under immense pressure.  

Relative poverty in Latvia remains high and is increasing, while spending on social protection 
remains low. The poor funding of the social system is the main driver of income inequality. Income 
distribution is more unequal in Latvia than in the EU on average. While the inequality of market 
incomes is about average, redistribution through taxes and social transfers is among the lowest in 
the EU3. The poor funding of the social system is linked indirectly with the relatively low tax intake 
as a share of GDP, limiting the amount of funding that can be spent on social programmes. The 
elderly, the unemployed and persons with disabilities are the most affected groups. Despite the 
recent increase in 2021, the guaranteed minimum income remains significantly below the poverty 
threshold and lacks a clear indexation mechanism. As a result, the share of people at risk of poverty 
or social exclusion and the poverty gap both remain wide. Income inequality is associated with 
unequal  access  to  healthcare,  which  is  significantly  more  difficult  for  low-income  groups,  who 
cannot afford private healthcare.  

Access to adequate housing is a challenge, particularly for low-income groups. The share of 
people facing severe housing deprivation is high. The social housing stock is low and often not fit 
for living, while waiting lists are long. The lack of affordable housing is among the main barriers 
to labour mobility and regional development. A comprehensive housing strategy is not yet in place, 
nor are the strategies to address homelessness and housing exclusion. 

Latvia  has  a  generally  favourable  business  environment,  but  some  areas  suffer  from 
expensive administrative obstacles and legal uncertainty. Latvia ranks 19th on the World Bank 
Doing Business index, reflecting its quick firm establishment process, openness to trade and robust 
legal framework. This is thanks to such measures as company registration e-service, introduction 
of “Zero Bureaucracy” and “Consult first” approach to public services. Latvia has also put efforts 
into  boosting  its  start-up  ecosystem,  by  providing  various  types  of  support  including  financial 
support,  a  special  tax  regime  for  start-ups,  a  start-up  visa  program,  acceleration  funds  and 
incubation  support.  As  a  result,  the  number  of  start-ups  has  increased  four  times  since  2012, 
reaching 450 active start-ups in 2020, which have attracted EUR 303 million of investments. At 
the same time, construction and wind energy sectors face notable barriers to investment related to 
lengthy  administrative  procedures  and  legal  unpredictability.  Getting  a  construction  permit  and 
other construction-related approvals is a lengthy and costly process, particularly in Riga. This has 
been among the key factors holding back investment in buildings. Moreover, implementation of 
onshore wind energy investments face legal unpredictability related to municipalities’ competence 

3 In 2018, social transfers (excluding pensions) reduced the risk of poverty rate by 19.1 % in Latvia vs 32.94 % in the 
EU. Latvia spent 11.6% of GDP on social payments, well below the EU average of 20.4%. 

10 

 
 
                                                            
regarding final approval of the projects. Despite having successfully completed of an extensive and 
lengthy environmental impact assessment process, the projects may still be rejected without giving 
a  justified  reason.  Moreover,  the  appeal  process  of  municipalities’  decisions  are  lengthy. 
Municipalities’ decisions are often influenced by community opposition to wind projects. In this 
regard, an equitable profit sharing mechanism that would benefit local communities is missing and 
could be explored as another means to foster wind energy deployment4. Due to this risk, investment 
in onshore wind in Latvia has been paltry. Finally, administrative and tax obstacles have hindered 
business investment in skills.  

The  main  areas  of  public  administration  facing  hurdles  include  tax  administration,  law 
enforcement and the judiciary, and public procurement. The VAT gap in Latvia is estimated 
to have markedly declined over the past years, slipping below the EU average indicator in 2019. 
Nevertheless,  other  measures  point  to  a  persistently  high  level  of  shadow  economy  and  its 
prevalence is estimated to have increased in 2018-20195. The large shadow economy partly reflects 
a lack of efficiency in the tax administration, which needs to adapt its organisation, operational 
practices  and  information  sharing  throughout  the  country  to  fight  tax  evasion  and  fraud  more 
effectively.  Overall,  Latvia’s  performance  in  the  area  of  public  procurement  is  satisfactory. 
Latvia’s main difficulties reside in the share of procedures with a single bidder (32%) and public 
procurement procedures negotiated without any call for bids (8%). This means that there is less 
competition and therefore public procurers have less options to get better value for money. The 
low number of tenders in public procurement can be due in some case to insufficient number of 
suppliers on the market. It can also be linked to the way the technical specifications are drafted and 
to the awareness of public procurers of the importance of competition6.  Moreover, public procurers 
often lack capacity to prepare and carry out large and complex procurement projects effectively.  

Policies for the next generation, children and young people, including education and skills  

A key challenge for education in Latvia is to ensure a comparable quality of education across 
schools  and  regions.  Access  to  inclusive  and  quality  education  remains  dependent  on  place  of 
residence,  with  larger  urban  schools  outperforming  smaller  rural  ones  (as  per  the  latest  PISA 
report). Latvia has started to consolidate its large and inefficient school network, but progress is 
slow, delaying gains in quality and efficiency. The share of students in vocational education and 
training  remains  lower  than  in  general  education,  and  graduate  tracking  is  not  yet  in  place. 
Renewing  the  teaching  workforce  is  a  challenge  and  teacher  shortages  are  becoming  apparent, 
especially in sciences and maths. Furthermore, COVID-19 restrictions exposed digital and social 
inequalities  (availability  of  hardware  and  internet  connections),  leading  to  uneven  access  to 
distance learning. 

The main challenge for Latvia’s higher education is taking action to reduce the fragmentation 
of the higher education system, which hinders its quality and competitiveness. The inefficient 
higher  education  governance  model  coupled  with  non-performance  based  funding  impairs 
scientific excellence and the attractiveness of the public science base for business and international 

4 For example, residents are often opposed to wind farms as they believe that it would have negative impacts such as 
visual presence, noise, flickering, and falling property value, among others (source: A breath of fresh air: Analysis of 
factors affecting deployment of wind energy in Latvia and potential solutions, 2019, by CEE Bankwatch Network) 
5 Sauka and Putnins, Shadow Economy Index for the Baltic Countries 2009–2019, 
https://www.sseriga.edu/sites/default/files/2020-06/BROCHURE_English_2020.pdf. 
6 Single Market Scoreboard 
https://ec.europa.eu/internal_market/scoreboard/performance_per_policy_area/public_procurement/index_en.htm 

11 

 
 
                                                            
partners.  A  set  of  reforms  of  the  governance  of  higher  education  institutions  in  general  and  of 
academic careers in particular is under way and could increase higher education’s strategic capacity 
and academic competitiveness. Existing plans to reduce the fragmentation of study programmes 
need to be given new momentum. 

Labour market skills shortages remain. The low level of digital skills among the labour force, 
flagged ‘critical’ on the Social Scoreboard, limits the use of digital technologies by businesses and 
the potential for innovation. The adult learning participation rate is low, especially among the low-
skilled.  The  challenge  remains  to  strengthen  the  governance  of  the  skills  system,  including 
planning, and to deliver high-quality adult learning to all, especially to vulnerable groups.  

2.3. Challenges related to the green and digital transition  

2.3.1. Green dimension  

The  recovery  and  resilience  plan  should  include  a  minimum  level  of  37%  of  expenditure 
related to the green dimension. The measures in the plan are expected to contribute to achieving 
the climate neutrality and the 2030 energy and climate targets entailed in the National Energy and 
Climate Plan. They should also contribute to meeting the environmental targets for waste, water, 
pollution control, sustainable mobility, biodiversity protection and restoration, marine and water 
resources, and support the transition to sustainable food systems as well as to a circular economy 
as  appropriate,  while  ensuring  that  nobody  is  left  behind.  This  can  be  achieved  by  equipping 
workforce  with  adequate  green  skills  and  providing  support  for  sustainable  innovation  and 
competitiveness. 

Reducing energy consumption in transport and buildings and boosting its renewable energy 
capacity  are  Latvia’s  key  energy  and  climate  policy  challenges.  Latvia’s  greenhouse  gas 
emissions per capita are among the lowest in the EU. This is because its energy consumption per 
capita is lower than the EU average, while its share of renewable energy is also among the highest 
in  the  EU.  Nevertheless,  Latvia  faces  major  challenges  over  its  non-ETS  emissions  reduction, 
which  have  been  increasing  due  to  rising  energy  consumption  in  transport  and  buildings.  As  a 
result, to meet its 2030 target for greenhouse gas emissions, Latvia would need to break the current 
trend of increasing energy consumption and emissions in transport and buildings. It would also 
need to continue increasing the share of renewables, which it has successfully done in heating and 
power generation, thanks to the widespread use of biomass-based cogeneration. Looking forward, 
the scope for increased use of sustainable biomass is limited and Latvia will need to tap the potential 
of wind and solar power as long-term solutions. Latvia also needs to boost its recycling rates and 
improve circular economy and the sustainability of its agricultural and forestry practices. 

Renewable energy 

Latvia already  achieved  its 2020 renewable energy target of 40% in 2019. Latvia has set a 
renewable energy share of 50% in gross final energy consumption for 2030, but risks falling short 
of it if the speed of renewables deployment is not accelerated, especially for wind energy. Latvia 
would  therefore  benefit  from  policies  and  measures  to  help  speed  up  renewables  deployment. 
Reducing the legal uncertainty and investment risk to onshore wind farm developers is necessary 
to boost wind energy, which plays a central role in Latvia’s plans to reach its 2030 contribution on 
renewable energy. It is equally important to make low-cost long-term financing available for green 

12 

 
 
 
 
investments, including investments in renewables. Latvia needs to develop an enabling framework 
for the uptake of local renewable sources other than biomass, focusing instead on sources such as 
ambient, geothermal, wind and solar energy, including promoting renewable self-consumption and 
renewable energy communities and citizen energy communities. 

Latvia plans to achieve a 7% share from renewable energy in transport by 2030. It plans to 
achieve  3.5%with  advanced  biofuels  and  by  increasing  the  electrification  of  rail  and  through 
electro-mobility.  Latvia  needs  to  provide  sufficient  safeguards  for  the  production  of  advanced 
biofuels in accordance with Annex IX to the Directive (EU) 2018/2001. More specific policies 
would be welcome to diversify and increase the uptake of renewables in transport. 

Energy efficiency 

For Latvia to achieve its energy efficiency target for 2030, it needs to break the trend of rising 
energy  consumption.  The  transport  and  buildings  sectors  are  the  largest  contributors  to  rising 
energy consumption. The key to curbing energy consumption growth in transport is to incentivise 
a modal shift from cars to public transport, particularly within the Riga metropolitan area, where 
more than half the country’s commuter traffic takes place.  

To  achieve  its  2030  energy  efficiency  target,  Latvia  should  speed  up  building  renovation. 
Current renovation plans fall significantly short of the efforts needed to achieve the 2030 national 
contribution.  Speeding  up  renovation  (in  line  with  Renovation  Wave)  involves:  (i)  scaling  up 
current support programmes; (ii) reducing the administrative cost of building renovation, including 
through  project  standardisation  and  aggregation;  and  (iii)  greater  availability  of  low-cost,  long-
term financing and private capital to reduce the public cost of renovating private buildings. Energy 
efficiency measures combined with renewable solutions should be encouraged, and due attention 
to energy poverty should be given when designing support measures. The long-term renovation 
strategy (required under the Energy Performance of Buildings Directive) should be used as basis 
for undertaking renovation measures with a view to decarbonising Latvia’s building stock by 2050.   

Circular economy 

Latvia’s performance in the transition to a circular economy is improving. In 2019, Latvia’s 
municipal waste recycling rate (including composting) was 41%, up from 25% in 2016.7 However, 
a  rate  of  4.7%  circular  material  in  2019  remains  below  the  EU-27  average  of  11.9%.  Latvia  is 
taking steps to move towards a more circular economy.  Nevertheless, it falls behind in its re-use 
and recycling targets as a lack of incentives for municipalities holds back investment in separate 
collection,  in  particular  in  Riga.  Furthermore,  the  quality  of  data  on  waste  collection  could  be 
improved.  Latvia  stands  to  benefit  from  boosting  recycling  and  separate  collections  of  waste, 
including bio-waste.   

Land use 

Latvia reduced its greenhouse gas emissions from agriculture between 1990 and 2018, but 
recent years and projections show a renewed, increasing trend. Although Latvia’s agricultural 
sector emits less greenhouse gas emissions than the EU average, the share of its total emissions 
stemming from agriculture is relatively high, particularly for agricultural soils. At the same time, 
there has been a significant decrease in total net greenhouse gas emission removals in LULUCF 

7 https://ec.europa.eu/eurostat/databrowser/view/cei_wm011/default/table?lang=en. 

13 

 
 
                                                            
(land  use,  land  use  change  and  forestry)  sectors,  mainly  due  to  the  increase  in  logging  and  the 
extension of peat. 

Forests  cover  54.9%  of  the  country’s  territory.  Latvia  could  focus  efforts  on:  (i)  fostering 
sustainable  forest  management  and  promoting  the  efficient  use  of  sustainable  biomass;  (ii) 
enhancing the multi-functionality of forests; (iii) promoting forest protection; and (iv) restoring 
forest ecosystems. 

Biodiversity 

The economic growth of Latvia in the latest decades has intensified pressures on the environment 
and biodiversity. The main pressures are agricultural, industrial and urban pollution and land use 
change.  The latest report required by Article 17 of the Habitats Directive on the conservation status 
of habitats and species shows that less than 10% of protected habitats and less than 40% of species 
have a favourable conservation status. Adopting conservation objectives and measures to maintain 
and upgrade species and habitats of community interest to a favourable conservation status and 
mainstreaming  biodiversity  conservation  and  sustainable  use  in  other  areas,  notably  forestry, 
agriculture, fishery and tourism could help address that situation. 

Air quality 

Measures targeting reducing air pollution and emissions, particularly from transport, agriculture 
and  through  improved  energy  efficiency  of  housing  would  support  the  National  Air  Pollution 
Control Programme and help Latvia comply with the 2020 commitments for nitrogen oxide (NOx) 
and  ammonia  (NH3)  emission  reduction  according  to  the  National  Emission  Reduction 
Commitments (NEC) Directive ((EU) 2016/2284.  

The  table  below  gives  an  overview  of  Latvia’s  objectives,  targets  and  contributions  under 
Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 
on the Governance of the Energy Union and Climate Action. 

Table 3: Latvia’s national targets and contributions regarding energy and climate 

National targets and contributions  

Binding target for greenhouse gas 
emissions compared to 2005 under the 
Effort Sharing Regulation (%) 

National target/contribution for 
renewable energy: Share of energy from 
renewable sources in gross final 
consumption of 
energy (%) 

Latest 
available 
data 

2020 

2030 

Assessment of 2030 
ambition level 

8 

+17 

-6 

As in ESR  

40% 

40% 

50% 

Adequate 
(50% is the result of 
RES formula) 

National contribution for energy efficiency: 

Primary energy consumption (Mtoe) 

Final energy consumption (Mtoe) 

4.6 

4.1 

5.4 

4.5 

4.1 

3.6 

Modest 

Modest  

Level of electricity interconnectivity (%) 

50% 

10% 

60% 

n/a 

Source: Assessment of the final national energy and climate plan of Latvia, SWD (2020) 926 final. 

14 

 
 
 
 
 
 
 
 
 
 
 
2.3.2. Digital dimension   

The recovery and resilience plan should contribute to the digital transition and at least 20% 
of the financial allocation needs to contribute to digital objectives. The measures in the plan 
should,  inter  alia,  contribute  to  the  digital  transformation  of  the  economic  and  social  sectors 
(including public administration, public services, and the justice and health systems). The objective 
of  the  measures  in  the  plan  should  be  to  improve  not  only  the  competitiveness,  but  also  the 
resilience, agility and security of companies and public actors, all while ensuring inclusiveness. 

Latvia ranks 18th in the European Commission’s Digital Economy and Society Index (DESI) 
for 2020. It is three ranks lower than the 2019 DESI and progressing slower than other EU Member 
States. 

1 Connectivity

2 Human capital

3 Use of internet services

4 Integration of digital technology

5 Digital public services

Digital Economy ans Society Index (DESI) 2020 ranking  

80

70

60

50

40

30

20

10

0

FI SE DK NL MT IE EE UK BE LU ES DE AT LT EU FR SI CZ LV PT HR HU SK PL CY IT RO EL BG

Source: 2020 DESI report 
Note: EU aggregate corresponds to EU28, based on 2020 DESI report. 

While Latvia is a front-runner in broadband coverage and take-up, and is well prepared for 
the 5G rollout, problems in ensuring accessibility to fast and reliable internet in rural regions 
remain.  The  country's  main  strengths  are  the  extremely  advanced  coverage  of  fast  broadband 
(NGA) (93% against the EU average 86%), and near complete average 4G coverage (99% against 
EU average 96%). In 2018, Latvia signed a memorandum of understanding for the Via Baltica 5G 
corridor  with  Estonia  and  Lithuania.  In  2020,  Poland  also  joined  the  Via  Baltica  5G  initiative.  
Latvia also performs well as regards to very high capacity networks (VHCN) and reaches coverage 
rates of almost 90%, far above the EU average of 49.6%. Fixed broadband coverage in Latvia is 
around 95 %, with wider disparities in rural areas at 80%. Ensuring fast and reliable broadband 
access to rural regions remains a challenge, highlighted by the difficulty these regions faced in 
organising distance learning during the COVID-19 pandemic. Extensive investments in middle-
mile  connections  in  rural  regions  have  been  made;  however,  private  investment  in  last-mile 
connections has not taken place due to such investments’ lack of commercial viability. For this 
reason,  public  funds  are  needed  to  ensure  fast  internet  access  to  rural  regions.  Also,  regulatory 
changes as well as investments are needed to lower the administrative cost of 5G infrastructure 
deployment, and for connected and automated mobility development.  

15 

 
 
 
The low level of digital skills in Latvia hampers its digital transformation. Latvia is far below 
the EU average in all indicators in the human capital dimension, ranking 24th in the EU. As of 
2019, 57% of the Latvian population lacked basic digital skills and Latvia had the lowest share of 
ICT specialists among its workforce in the EU. The shortage of digital skills is a key obstacle to 
more widespread use of digital solutions by the private sector. Almost half of Latvian firms that 
tried to fill vacancies for digital specialists find it difficult to do so.   

The digital provision of public services is strong, Latvia ranking fifth in the DESI. The number 
of e-government users continues to increase and there was a further improvement in the provision 
of online public services. The government adopted its 2020-2023 public service development plan, 
which aims at proactive service provision, user-centricity built around key life events, coordinated 
and integrated approach in service design, cross-border services, digital-by-default and digital-first 
principles. Overall, the plan continues promoting the use of ICT as a tool to build a knowledge-
based economy and to improve the overall quality of life.  

At the same time, only 14% of companies are highly digitalised with Latvia ranking 23rd 
among EU Member States in the DESI. Latvian firms make limited use of cloud services and 
big data. Latvian firms also engage in less e-commerce than their EU counterparts: only 11% of 
Latvian SMEs sell online (compared to the EU average of 18%), and the SME turnover generated 
from  e-commerce  (5%)  is  less  than  half  of  the EU  average  (11%).  Latvian  enterprises  also  lag 
behind  their  EU  counterparts  in  electronic  information  sharing,  use  of  social  media  and  selling 
online cross-border, despite recent progress.  

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Box 1: Progress towards the Sustainable Development Goals 

Sustainable Development Goals and the four dimensions underpinning the Annual 
Sustainable Growth Strategy

This section outlines Latvia’s performance with respect to SDGs with particular relevance for the 
four dimensions underpinning the recovery and resilience plans (green transition, fairness, digital 
transition  and  productivity,  and  macroeconomic  stability),  indicating  possible  areas  where 
investments  and  reforms  in  line  with  the  objectives  of  the  Facility  could  further  accelerate  the 
progress on the SDGs. 

Green transition. Latvia has achieved a relatively high share of renewable energy in electricity and 
heating, but to achieve its long-term climate goals it will need to invest substantially in wind and 
solar energy and promote renewables in transport. Latvia’s performance in energy efficiency has 
been  more  modest,  and  significant  investments  in buildings  and  transport sectors are needed to 
achieve country’s energy efficiency goals. Latvia lags behind in resource efficiency and its circular 
material use rate is below the EU average. 

17 

 
 
 
Fairness.  While  poverty  has  declined  significantly  in  the  past  decade  thanks  to  a  higher 
employment rate, income inequality in Latvia remains high. The high income inequality primarily 
reflects the weak social safety net. The most vulnerable groups are the elderly, the unemployed, 
persons with disabilities and families with 3+ children.  

Digital transition and productivity. Latvia has achieved remarkable productivity growth over the 
past two decades and remains on a solid path going forward. However, a declining population, poor 
innovation performance and struggling private investments pose a challenge to productivity growth 
in  the  medium  term.  Latvia  enjoys  world-class  digital  connectivity  and  has  generally  wide 
availability of public digital services; however, the population’s digital skills and  use  of digital 
solutions among businesses are low. 

Macroeconomic stability. Latvia has pursued a prudent fiscal policy and its public debt, at 43.5% 
of GDP, remains sustainable. Its current account is balanced, and house prices and credit growth 
remain low. However, labour costs have been rapidly rising in recent years, raising some concerns 
about the country’s price competitiveness.  

3.  OBJECTIVES, STRUCTURE AND GOVERNANCE OF THE PLAN 

3.1. Overall strategy of the plan  

Latvia’s  Recovery  and  Resilience  Plan  aims  to  support  the  recovery  from  the  COVID-19 
pandemic, promote sustainable growth and job-creation based on increased productivity and 
exports,  and  stimulate  Latvia’s  economic  convergence,  while  contributing  to  the  twin 
transition.  The  plan  is  based  on  the  priorities  of  the  National  Development  Plan  2021-2027, 
National  Industrial  Policy  2021-2027,  Latvia’s  Smart  Specialisation  Strategy,  Post-COVID-19 
Economic Resilience Strategy and the National Energy and Climate Plan (NECP ). Furthermore, 
Latvia’s plan takes into account sectoral development strategies, joint EU-level priorities, Latvia’s 
international commitments and long-standing challenges to social and economic convergence.  

The strategy of Latvia’s plan is to exit from the COVID-19 crisis with a stronger and more 
resilient economy than when it entered the crisis. According to the plan, Latvia’s exit strategy 
contains three phases: stabilisation (2020), reorientation (2021-2022), and new growth (from 2023 
onwards). While budgetary means and crisis-response instruments have been used for short-term 
financial  stabilisation,  the  plan  is  expected  to  foster  medium-term  economic  reorientation  and 
renewed growth. In the reorientation phase, the plan is expected to create new opportunities for 
businesses by supporting innovation, digital transformation, life-long learning and upskilling, by 
structural changes in the economy and targeted public sector intervention. In the new growth phase, 
the plan is expected to help economic transformation by boosting exports, stimulating productivity, 
driving digital transition and automation, supporting fast-growing firms, industries and innovation 
ecosystems.  

Latvia's  plan  (for  EUR 1 826 000 000  in  non-repayable  support)  is  divided  into  six 
components:  green  transition,  digital  transition,  reduction  of  inequality,  healthcare, 
productivity and the rule of law. The components broadly correspond to the six pillars of the 
RRF. All the components contain both reform and investment measures. However, investments are 
somewhat more prominent than reforms. Across the components, the Plan contains 85 measures in 
total, including 24 reform and 61 investment elements. 

18 

 
 
 
Table 4: List of components and associated costs in Latvia’s RRP 

Component 

1. Green transition (sustainable transport, energy efficiency, renewable energy 
and decarbonisation of electricity grids, climate adaptation) 
2. Digital transition (public and private sector digitalization, e-government 
services, data management, digital skills, 5G and last-mile connectivity) 
3. Reduction of inequality (road renovation, school infrastructure, affordable 
housing, industrial parks, social services, long-term care, upskilling) 
4. Healthcare (hospital and ambulatory care infrastructure, human resources, 
resilience, public health) 
5. Productivity (innovation governance, boosting private R&D investment, 
higher education and science governance, research careers)  
6. Rule of law (combating economic crime, justice sector training, AML, public 
administration, procurement) 

Costs  
(€ million) 

676.2 

365.3 

370.0 

181.5 

196.0 

37.0 

Green transition. Comprising EUR 676.2 million or 37.6% of the total allocation of the plan, the 
green transition component is the largest component of the plan. This component aims to address 
the challenges identified in Latvia’s National Energy and Climate Plan, such as energy efficiency 
of  buildings,  emissions  from  transport,  deployment  of  renewables  and  de-carbonisation  of 
electricity. The component contains two main reforms – the creation of a joint multimodal transport 
network in the Riga metropolitan area and the overhaul of fire and rescue services. Another reform 
–  incentives  for  wind  power  development  through  better  regulatory  framework,  improved 
community  relations  and  reduced  legal  uncertainty  for  investors  –  is  associated  with  the 
modernisation  of  the  electricity  grid  to  make  it  fit  for  decentralised  electricity  generation  and 
infrastructure  for  electric  charging.  In  this  component,  46%  of  investments  will  target  energy 
efficiency in multi-apartment buildings, central government, historical and municipal buildings and 
the business sector, while 43% – a sustainable transport system in Riga metropolitan area. It is 
planned that 81 km of rail lines will be electrified, 7 new electric battery powered trains and 21 
low-emission  busses  and  trams  procured  and  60  km  of  cycling  lanes  will  be  developed  in  the 
Greater Riga area. In addition, the investments will enable the State Fire and Rescue Service to 
build 8 new modular depots and help implement 29 polder and dam projects to reduce flood risks 
in 59 000 ha of Latvia’s territory. As a result, Latvia aims to save 36 241 tons of CO2 and 49 812 
MWh/year in primary energy use. 

Digital transition. With EUR 383.8 million or 21% of the total allocation of the plan, the digital 
component (EUR 365.3 million) and separate measures in rule of law and inequality components 
aim to address the challenges for Latvia identified in EU’s Digital Society and Economy Index 
(DESI), notably, the low level of digital skills, low uptake of digitisation by businesses, and missing 
last-mile  digital  connection  infrastructure.  The  component  also  aims  to  improve  e-government, 
interoperability of systems and data management and to develop ICT supporting infrastructure and 
e-services. The component includes 7 reforms, such as centralised planning of ICT development; 
consolidation of public IT systems, platforms and infrastructure; improved data management; full-
cycle  support  to  business  digitisation;  a  reform  of  general  and  digital  skills  delivery  as  well  as 
common broadband infrastructure standards (for 5G and last-mile connections). In this component, 
35% of investments will target public sector digitisation, 34%for the– private sector, and 26% for 
digital  skills.  According  to  the  plan,  Latvia  intends  to  modernise  11  e-government  solutions, 

19 

 
 
 
develop 15 centralised platforms/systems, place 10 systems on the national federated cloud, help 
more than 7000 businesses to digitalise, improve the digital skills of 54,500 individuals, 62,900 
public sector employees, 3000 businesses, educate 1000 high-level ICT professionals, and make 
26,620 digital equipment available for schools to ensure access to ICT for all schoolchildren. The 
plan is expected to ensure 100% broadband connectivity along the Via Baltica route and link up to 
1500 homes, businesses and socio-economic drivers to last-mile broadband connections. The level 
of population with at least basic digital skills should increase from 43% in 2020 to 54% in 2026. 

Reduction of inequality. Accounting for EUR 370 million or 20% of the total allocation of the 
plan, this component attempts to address the twin challenges of territorial and social disparities in 
Latvia. The objective of the component is to reduce inequality by creating more jobs in the regions, 
improving  regional  connectivity  and  access  to  services,  providing  more  affordable  housing, 
improving  school  infrastructure,  helping  to  up-skill  and  re-skill  workers  and  unemployed, 
strengthening  the  social  safety  net,  improving  accessibility  to  private  and  public  buildings  for 
persons  with  disabilities,  and  construction  of  new  long-term  care  facilities  for  the  elderly.  The 
component includes two reforms – the ongoing administrative territorial reform and a minimum 
income reform, which foresees setting the minimum income level at 20% of the national median 
income and introducing annual indexation. In the component, 70% of investments target territorial 
disparities, while 30% target social inequality. On the basis of the plan, Latvia will renovate 210km 
of regional roads, construct 4 regional industrial centres, upgrade the infrastructure of 20 schools, 
procure 15 low-emission school busses, train 1300 municipal employees, provide 700 affordable 
housing units, upskill 20,450 jobseekers, provide accessibility to private homes for 259 persons 
with  disabilities  and  to  63  public  buildings  and  build  long-term  care  facilities  for  852  elderly 
persons. Planned investments should take into account regional and local development strategies, 
thus ensuring an integrated approach and sustainability of investments.   

Healthcare. With EUR 181.5 million or 10% of the total allocation of the plan, the component 
aims to contribute to the accessibility, efficiency and resilience of Latvia’s health system, which 
was heavily tested during the COVID-19 pandemic.  The component contains three broad reforms 
– building a human-centred, integrated and resilient care system through development of a health 
infrastructure investment strategy, recommendations for integrated and epidemiologically safe care 
provision, guidelines for oncological care, participation in the “Genome for Europe” project and 
the development of a digital health strategy; improvement of human resources and skills through 
the development of a human resource strategy and mapping; and strengthening the effectiveness, 
governance  and  sustainability  of  the  health  system  through  more  effective  service  delivery  and 
assessment and piloting of new service models. In the component, 82% of the investments target 
the improvement of infrastructure of 3 university hospitals in Riga, 7 regional hospitals and 40 
ambulatory care institutions.   

Productivity. This component accounts for EUR 196 million or 11% of the total allocation of the 
plan and responds to the R&I challenges identified in the European Semester, such as low private 
sector  investment  in  R&D  (business  expenditure  on  R&D  was  0.18%  of  GDP,  and  total  R&D 
investment was 0.64% of GDP in 2019) and a fragmented research and innovation system. The 
component contains two main reforms – improved innovation governance through an ecosystem 
approach and full-cycle support for innovation clusters and continuation of a higher education and 
science governance reform through consolidation of higher education institutions and support for 
research and academic careers. In the component, 58% of the investment measures target support 
for stimulating private sector R&D, while 42% target consolidation, academic careers and research 
grants.  Owing  to  the  investments,  5  functional  innovation  clusters  would  be  developed  and 

20 

 
 
supported,  4-6  universities  would  receive  consolidation  grants  in  exchange  for  mergers,  315 
students will receive doctoral and post-doctoral grants, and 90 researchers research grants.  

Rule of law. With EUR 37.0 million or 2% of the total allocation of the plan, this is the smallest 
component  and  responds  to  the  long-standing  challenges  in  dealing  with  economic  crime 
(including  tax  evasion),  effectiveness  of  public  administration  and  professionalism  in  public 
procurement. The component contains 8 reforms: improved analytics and data management in tax 
and customs administration; development of remote imaging; modernisation of money-laundering 
and  other  economic  crime  investigation  and  judicial  procedures;  training  of  public  officials; 
development  of  public  procurement  contract  registry;  fostering  the  competition  culture; 
development of a procurement professionalisation strategy and IT and analytical capacity-building 
in public procurement. The component also contains various diverse investment projects, including 
procurement of customs technical equipment, a Judicial Training Academy, capacity-building of 
NGOs, and training of more than 16.000 officials in ethics, integrity, anti-corruption and more than 
20.000 officials in leadership, change management, strategic planning and related competences.   

3.2. Implementation aspects of the plan  

Consistency with other programmes, including the National Reform Programme, is ensured. 
Latvia’s plan is broadly consistent with the National Reform Programme, National Climate and 
Energy Plan, National Just Transition Plan (in negotiation), Partnership Agreement (in negotiation) 
and  Operational  Programmes  (in  negotiation).  The  plan  makes  appropriate  references  to 
demarcation  and  complementarities  across  the  various  funding  programmes.  In  general  terms, 
Latvia intends to use the RRF funding first, and other funding programmes afterwards, as RRF is 
a  more  time-limited  instrument.  However,  in  certain  areas,  such  as  social  housing,  de-
institutionalisation, youth, education content, support to SME IPOs and some others, Latvia has 
made a conscious choice not to use RRF, but Cohesion Policy instruments linked to thematic logic. 
While Latvia’s RRF allocation is sizable in relation to the country’s GDP, it is not with respect to 
the magnitude of the challenges, especially, in green transition and social policy, RRF funding will 
therefore serve as a top-up to existing support schemes, funded by Cohesion Policy, such as in 
increasing  energy  efficiency  of  multi-apartment  houses  and  helping  businesses  with  the  green 
transition. 

The plan is broadly consistent with the challenges and priorities identified in the most recent 
euro area recommendation. The draft8 Council recommendation on the economic policy of the 
euro  area    recommended  to  euro  area  Member  States  to  take  action,  including  through  their 
recovery and resilience plans, to, inter alia, ensure a policy stance which supports the recovery, 
including  by  strengthening  the  coverage,  adequacy  and  sustainability  of  the  health  system.  The 
RRP contributes to EAR 1, as it pursues reforms and investments to support provision of integrated 
and human-centred health care, raise the capacity of health institutions to adapt to crisis situations 
and  addresses  the  shortages  of  health  workforce  included  in  the  component  4  on  health,  while 
component 3 on inequalities reduction will improve the adequacy of the minimum income support 
system. The Council recommendation also recommended euro area Member States to, inter alia, 
further  improve  convergence,  resilience  and  sustainable  and  inclusive  growth,  including  by 

8 Pending final adoption by the Council, after endorsement by the European Council. The text agreed by the 
Eurogroup on 16 December 2020 is available at: https://data.consilium.europa.eu/doc/document/ST-14356-2020-
INIT/en/pdf. 

21 

 
 
 
                                                            
ensuring effective active labour market policies and support to job transitions, notably towards the 
green  and  digital  transition,  as  well  as  by  improving  the  functioning  of  public  administration. 
Components 1 and 2 include reforms and investments to promote the climate change adaptation 
and  mitigation  and  digital  transition  respectively,  while  component  3  on  reducing  inequalities 
includes measures aimed to improve the labour market participation. The component 6 contains 
significant  reforms  to  improve  the  functioning  of  public  administration  such  as  increasing  the 
efficiency of tax administration, strengthening the competencies of the justice system, modernizing 
public administration and improving the quality and efficiency of public procurement. 

The plan sets out a clear administrative organisation for its implementation. Latvia’s Ministry 
of Finance, which is the Managing Authority for Cohesion Policy programmes, will also be the 
national coordinator for the RRF. The Ministry of Finance will work closely with line ministries, 
the  State  Chancellery  and  the  Central  Finance  and  Contracting  Agency  in  order  to  ensure  and 
monitor the implementation of the plan.  

The plan’s implementation set-up will be based on the existing cohesion policy framework. 
On 18 August 2020, the Cabinet of Ministers adopted a decision that the implementation process 
of the RRF will be ensured in the framework of the existing management and control system for 
EU funds 2014-2020. Based on this and the RRF regulation, the Cabinet of Ministers regulation 
for RRF implementation will be adopted by the end of 2021. The Cabinet of Ministers shall lay 
down  the  procedures  for  implementing  and  monitoring  recovery  and  resilience  plan  and  the 
procedures for using the IT system KPVIS. 

Latvia plans the implementation of various measures to promote gender equality and equal 
opportunities  for  during  the  implementation  phase  of  the  key  investments.  With  regard  to 
gender  equality  and  equal  opportunities  for  all,  the  plan  describes  existing  national  challenges 
mainly  in  terms  of  gender  equality  and  needs  of  persons  with  disabilities,  and  explains  which 
investments are expected to contribute to overcoming the challenges identified. The challenges are 
supported  by  statistics  disaggregated  by  gender.  This  description  includes  a  wider  reference  to 
legislative and policy initiatives that are due to complement the reforms and investments in the 
plan in order to overcome the identified national equality challenges.  

The RRP was the subject of various public discussions and debates, which covered the plan’s 
main elements. Series of thematic public consultations open to civil society organisations, social 
partners, local authorities and other stakeholders have been organised between December 2020 and 
March 2021. Representatives from social partners, business organisations, local governments and 
other stakeholders have been taking part in the Plan negotiation process between the Commission 
and the Latvian authorities. Partners’ suggestions for the draft Plan are publicly available and have 
been published along with the draft plan. From 8 February to 9 March 2021, all interested parties 
had the opportunity to submit their views and comments by taking part in the public consultation 
on the draft plan. Stakeholders’ engagement in the implementation is planned to be established 
through the management and control system used for the implementation of the Cohesion policy 
support,  where  stakeholders’  representatives  form  an  integral  part  of  the  EU  funds  Monitoring 
Committee. 

A  preliminary  security  self-assessment  is  included  in  each  component  and  enlists  the 
measures  that  have  a  security  dimension.  Latvia  will  address  cybersecurity  and  other  digital 
security aspects of these measures during implementation. Overall, investments are contributing to 
strengthen the digital security. However, the types of controls employed to mitigate the risks are 
not  explained  in  detail  and  the  described  security  self-assessment  is  rather  general.  Strategic 

22 

 
 
measures mentioned in the security self-assessment would need to be closely monitored during the 
implementation of the plan. 

The Latvian RRP includes the following cross-border projects:  

  Via  Baltica  5G  corridor:  Latvia  has  planned  a  series  of  measures  that  support  the 
objectives  of  the  EU’s  digital  sovereignty,  including  investments  in  connectivity  at 
European  level  –  the VIA Baltica 5G  corridor. Latvia has concluded a memorandum of 
cooperation with Estonia, Lithuania and Poland on the development of this corridor. 
  Baltic States’ X-ray image exchange system (Baxe): Within the framework of the reform 
and  investment  direction  "Reducing  the  shadow  economy  for  the  promotion  of  fair 
business", the planned investments envisage the expansion of the Baltic States’ X-ray image 
exchange  system  (Baxe),  by  connecting  the  uniform  image  exchange  system  of  x-ray 
equipment in the three Baltic States.  

  Latvia  has  identified  potential  linkages  with  several  European  transnational  project 
initiatives,  including  those  whose  activities  are  expected  to  be  co-financed  under  the 
Digital Europe Programme, e.g. Establishment of the Latvian Federal Cloud and linking 
the  development  of  the  National  Data  Sharing  Platform  to  the  Single  European  Data 
Infrastructure and Service, as well as the United Public Administration Priorities, network 
of European Digital Innovation Hubs, Genome Europe, etc. 

  GoLatvia project: The development of the genomic reference of Latvian citizens will be 
implemented  in  the  framework  of  the  European  Union’s  1+MG  initiative  involving  23 
European countries. 

The RRP broadly outlines Latvia’s communication plans. The objectives of the communication 
strategy  are  in  line  with  the  RRF  Regulation  and  aim  to  raise  awareness  about  the  RRP’s 
contribution to the Latvian and European recovery and to the twin transition. Moreover, the RRP 
related communication will be integrated in the overall communication strategy of EU funds, EU 
Funds Communication Management Group. 

Latvia plans to target three main groups, consistent also with the geographical and thematic 
scope  of  the  RRP:  specific  target  audiences  (potential  applicants  and  final  recipients,  entities 
participating in the implementation of the RRP, social partners and NGOs), corporate (internal) 
target groups and the general public. A wide range of communication channels will aim to provide 
objective and comprehensive information to all the above-mentioned target groups. A single EU 
funds  homepage  (to  be  developed  in  2021)  will  provide  a  direct  access  to  all  information  and 
communication materials. The communication channels used will range from information sessions 
(workshops,  conferences,  trainings,  press  conferences),  advertising,  printed  material,  as  well  as 
social media, in line with the specificities of the target audience. It is expected that Latvia will 
ensure the necessary funding of all these measures.   

The  plan  foresees  a  series  of  coordinated  communication  activities  with  the  European 
Commission,  including  joint  press  releases,  social  media  posts,  possible  events  with  the 
participation of Commissioners and members of the European Parliament. These would focus on 
key areas such as the greening of the Riga Metropolitan Area Transport System, improving energy 
efficiency  in  public,  residential  and  historic  buildings,  climate  change  adaptation,  digital 
transformation of the public administration, digitalisation and innovation of SMEs, digital skills at 
all levels, reducing inequality, strengthening the health infrastructure. 

State  aid  and  competition  rules  fully  apply  to  the  measures  funded  by  the  Recovery  and 
Resilience Facility.  Union  funds  channelled  through  the  authorities  of  Member  States,  like  the 

23 

 
 
RRF funds, become State resources and can constitute State aid if all the other criteria of Article 
107(1)  TFEU  are  met.  When  this  is  the  case  and  State  aid  is  present,  these  measures  must  be 
notified and approved by the Commission before Member States can grant the aid, unless those 
measures are covered by an existing aid scheme or comply with the applicable conditions of a block 
exemption regulation, in particular the General Block Exemption Regulation (GBER) declaring 
certain categories of aid compatible with the internal market in application of Articles 107 and 108 
TFEU9. When State aid is present and it requires notification, it is the duty of the Member State to 
notify  State  aid  measures  to  the  Commission  before  granting  them,  in  compliance  with  Article 
108(3)  TFEU.  In  this  respect,  the  State  aid  analysis  carried  out  by  Latvia  in  the  recovery  and 
resilience plan cannot be deemed a State aid notification. In as far as Latvia considers that a specific 
measure contained in the recovery and resilience plan entails de minimis aid or aid exempted from 
the notification requirement, it is the responsibility of Latvia to ensure full compliance with the 
applicable rules. 

4.  SUMMARY OF THE ASSESSMENT OF THE PLAN 

4.1. Comprehensive  and  adequately  balanced  response  to  the  economic  and  social 

situation  

The  plan  includes  a  balanced  set  of  reforms  and  investments  aimed  at  addressing  the 
country’s key challenges, stimulating the recovery from the COVID-19 crisis and laying the 
foundation  for  its  long-term  growth.  The  plan  includes  85  measures  (21  reforms  and  64 
investments)  that  are  structured  around  the  country’s  main  challenges  and  the  policy  areas  of 
European  relevance,  thus  covering  all  ‘six  pillars’  in  a  balanced  way.  The  plan  includes  6 
components: green transition, digital transition, inequality reduction, health, productivity, and rule 
of law. The components’ objectives are complementary and the reforms leverage the impact of 
associated investments, notably by bringing structural change and increasing the participation and 
financing  of  private  agents.  However,  the  plan  is  stronger  on  the  investments  side  than  on  the 
reforms side. Latvia submitted its National Reform Programme on 14 April 2021. The information 
provided in the National Reform Programme is being considered and jointly assessed in this Staff 
Working Document together with the Recovery and Resilience Plan. 

Overall, the plan is balanced and focuses on Latvia’s main challenges: the twin transitions, 
social inclusion, including healthcare, social safety net and regional disparities, skills, including 
digital skills, adult learning, and higher education, productivity, including research and innovation 
and support for business investments, and administrative capacity, including tax administration, 
public  procurement  and  the  judicial  system.  As  a  result,  the  balance  among  the  six  pillars  is 
sufficient. The coverage of the Latvian plan’s components toward the six pillars is summarized in 
Table 5. below. The green and digital pillars also meet the allocation targets. 

Table 5: Coverage of the six pillars of the Facility by the Latvian RRP components  

Green 
transition 

Digital 
transitio
n 

Smart, 
sustainable 
& inclusive 
growth 

Social 
and 
territorial 
cohesion 

Health, 
and 
economic, 
social and 
institution

Policies 
for the 
next 
generati
on 

9 Commission Regulation 651/2014, OJ L 187, 26.6.2014, p. 1. 

24 

 
 
 
  
                                                            
al 
resilience 

● 

1. Green transition 
2. Digital transition 
3. Inequality 
4. Health 
5. Productivity 
6. Rule of law 
Key: “●” investments and reforms of the component significantly contribute to the pillar; “○” the component partially 
contributes to the pillar 

●  
○  

● 
● 

● 
● 

● 

● 

○ 

● 

● 

● 
● 

1st Pillar: green transition  

The plan adequately covers the ‘first pillar’ with one main component ‘green transition’. 

Measures under the component 1 ‘green transition’ directly contribute to the ‘first pillar’. 
The aim of this component is to support the transition to climate neutrality: improvements of energy 
efficiency of public and private buildings, support to businesses to improve their energy efficiency, 
increase of the production and use of renewable energies, greening of the transport system of the 
Riga Metropolitan area (including developing multimodal connections to Rail Baltica and cycling 
infrastructure), support to increase the production of electricity from renewable sources and the 
modernisation of electricity transmission and distribution networks (smart grids), also contributing 
to the synchronisation of the Baltic electricity networks with the Continental European network.  

Latvia’s recovery and resilience plan puts particular focus on sustainable mobility. This is 
reflected by measure 1.1.1 Riga - Transport reform. As part of the green transition and to reduce 
greenhouse gas emissions in Riga, the measure proposes an investment programme to decarbonise 
and improve public transport. The plan will focus on railway solutions (electrification of 81 km of 
railway) and zero-emission electro-mobility (acquisition of 4 low-floor trams, 17 electric buses and 
7 electric bus charging stations, construction of  cycle roads ).  

The Plan also has a strong pillar focused on energy efficiency improvement (subcomponent 
1.2).  This  subcomponent  notably  includes  energy  efficiency  measures  for  multi-apartment 
buildings (1.2.1.1), businesses (1.2.1.2), municipal buildings and infrastructure (1.2.1.3) as well as 
public  sector  buildings,  including  historical  buildings  (1.2.1.4)  with  business  being  the  largest 
recipient of funds. Lastly, beyond energy efficiency, this subcomponent is completed by a measure 
supporting  the  modernisation  of  electricity  transmission  and  distribution  networks  and  the 
deployment of renewable energy (1.2.1.5). 

The Plan also has a pillar focused on climate change adaptation (subcomponent 1.3). This 
subcomponent consists in a fire prevention measure renovating fire rescue centres as newly built 
energy  efficient  buildings  as  part  of  an  overall  reform  (see  explanation  above  1.3.1.1i. 
Strengthening  the  capacity  of  the  rescue  services).  It  also  includes  flood  prevention  measures 
including the rehabilitation of polder pumping stations, the restoration of protective dikes and of 
regulated sections of rivers. This contributes to the objective of climate change adaptation.   

These measures contribute to the green transition and help to enhance energy efficiency.  

25 

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
Based on the methodology for climate tracking set out in Annex VI to Regulation (EU) 2021/241, 
the quantitative assessment of the plan in relation to the climate target finds a contribution of 37.6% 
of the total allocation, thereby complying with the minimum threshold of 37%.   

2nd Pillar: digital transition  

The plan adequately covers the ‘second pillar’, with 3 main components directly contributing 
to the ‘digital transition’.  

Measures under the digital transition component (component 2) directly contribute to the 
‘second  pillar’.  The  component  addresses  the  main  digital  challenges  -  a  lack  of  basic  and 
advanced  digital  skills  and  low  digital  integration  of  the  businesses.  Moreover,  the  component 
addresses  all  the  aspects  of  the  digital  transformation  -  public  and  private  sector,  skills  and 
connectivity.  The  measures  planned  aim  to  develop  the  necessary  infrastructure,  capacities  and 
skills, improve efficiency, digital processes and data management in public administration, provide 
support to the digital transformation of businesses and improve connectivity. There is  considerable 
support for digital skills which shall have a significant long-term impact on digital transformation. 
Measures fostering business digital transformation, and measures aimed at fostering connectivity, 
would also contribute to this pillar. 

Some measures under the component 6 (rule of law) and component 3 (inequality) are also 
expected to contribute to the ‘second pillar’ and benefit from it. These measures address the 
participation  in  the  labour  market  of  the  unemployed,  job-seekers  and  people  at  risk  of 
unemployment  (3.1.2.5.i.)  and  modernising  the  technical  and  analytical  capacities  for  the 
implementation  of  rule  of  law  enforcement,  including  using  AI  solutions  (6.1.1.1.i.,  6.1.1.2.i., 
6.1.1.3i., 6.1.2.1.i.).  The accompanying digitalisation efforts of the procurement and tax reforms 
also contribute to the digital transformation.  

Based on the methodology for digital tagging set out in Annex VII to Regulation (EU) 2021/241, 
the quantitative assessment of the Plan in relation to the digital target finds a contribution of  21% 
of  the  total  allocation,  therefore  complying  with  the  minimum  threshold  of  20%,  with  a  direct 
contribution from 3 Components out of 6.  

3rd  Pillar:  smart,  sustainable  and  inclusive  growth,  including  economic  cohesion,  jobs, 
productivity, competitiveness, research, development and innovation, and a well-functioning 
internal market with strong SMEs  

The plan adequately covers the ‘third pillar’, with 3 main contributing components. 

The  plan’s  components  related  to  green  and  digital  transition,  and  productivity  (i.e. 
components 1, 2 and 5) contribute most to the ‘third pillar’. The key measures that contribute 
to the third pillar are the greening of Riga metro area transport system, the development of the 
digital services economy, the investments in basic and advanced digital skills, the investments in 
5G  infrastructure  for  automated  mobility,  and  the  grant  support  programmes  for  business 
investment in energy efficiency, uptake and production of renewable energy and digital solutions, 
as  well  as  in  innovation.  These  measures  are  expected  to  help  improve  the  country’s 
competitiveness,  resilience,  productivity  and  innovation  capacity,  as  well  as  the  availability  of 
workforce.  Moreover,  the  business  support  schemes  are  expected  to  benefit  primarily  SMEs. 

26 

 
 
  
  
Moreover,  an  ambitious  reform  of  the  higher  education  institutions  is  expected  to  achieve 
improvements in the quality of higher education and the universities’ research output. Measures at 
reducing the shadow economy and measures aimed at promoting the competition for public tenders 
is expected to contribute to levelling the playing field. Finally, investments in affordable housing, 
industrial  infrastructure,  and  roads  in  peripheral  regions  will  help  support  territorially  inclusive 
growth.  

4th Pillar: Social and territorial cohesion  

The plan adequately covers the ‘fourth pillar’, with 2 main contributing components. 

The plan’s inequality and health components (i.e. components 3 and 4) include measures that 
aim at improving social inclusion and addressing regional disparities. An introduction of the 
annual indexation of minimum income, as well as investments in social infrastructure and services 
(under component 3) are key measures of the plan to address social challenges. Investments and 
reforms  aimed  at  improving  accessibility  to  healthcare  services  (under  component  4)  will 
strengthen the inclusive provision of healthcare. Finally, a major administrative territorial reform 
(under component 3), which was passed in 2020 lays the foundation of Latvia’s plan to provide 
peripheral  regions  with  better  growth  opportunities  and  citizens  with  better  quality  local  public 
services.  

Investments and reforms in social inclusion and healthcare are expected to strengthen social 
cohesion and social protection. The introduction of indexation of minimum income benefits will 
ensure  they  will  be  annually  adjusted  to  the  median  wage  growth,  maintaining  their  adequacy 
levels. Under the previous system, indexation of minimum income benefits followed a haphazard 
pattern which in practice led to their decrease in real terms over the previous 8 years. This measure 
is  expected  to  improve  the  livelihoods  of  some  of  the  most  vulnerable  parts  of  the  society  and 
therefore  contribute  to  Latvia’s  social  cohesion.  Combined  with  the  increase  of  the  minimum 
income benefits from around 10% of the median income to 20% which was introduced starting 
from 2021, these measures are expected to improve Latvia’s performance on the Social scoreboard, 
where income inequality and the impact of social transfers have been Latvia’s main challenges. 
Furthermore, investments in health infrastructure combined with a reform aimed to attract more 
human resources to the sector are expected to improve accessibility of healthcare, the lack of which 
has predominantly affected the low-income earners and people living in peripheral areas.  

The  administrative  territorial  reform  coupled  with  investments  in  affordable  housing, 
industrial infrastructure, schools and renovation of regional roads comprise Latvia’s efforts 
to help its lagging regions develop.  There are marked income level differences within the country 
– with Riga and its surroundings enjoying approximately twice the income level of the rest of the 
country.  The  peripheral  regions  have  suffered  from  a  vicious  cycle  of  labour  emigration  and 
diminishing  work  opportunities  on  the  one  hand  and  dwindling  resources  for  essential  public 
services on the other hand. Latvia’s plan refers to the recently adopted administrative territorial 
reform, which will merge the number of municipalities from 119 to 42, thus making them stronger 
and better capable to ensure the provision of quality public services and to make the investments 
necessary to create more employment opportunities. Building on this reform, Latvia’s plan includes 
measures that would improve public services and their accessibility, through investments in roads, 
hospitals,  schools  and  some  social  infrastructure.  Furthermore,  it  includes  investments  in 
affordable  housing  and  industrial  infrastructure.  Investments  in  affordable  housing  should  help 
foster labour supply for businesses in peripheral regions which has been hampered by the lack of 
27 

 
 
 
housing  opportunities  in  the  places  with  the  best  employment  opportunities.  Investments  in 
industrial  infrastructure  are  aimed  at  attracting  private  sector  investors  to  these  regions.  Taken 
together,  these  measures  make  up  a  sizable  effort  of  creating  better  growth  opportunities  in 
peripheral regions and therefore reducing regional disparities.  

5th Pillar: Health and economic, social and institutional resilience, with the aim of increasing 
crisis preparedness and crisis response capacity, among others  

The plan adequately covers the ‘fifth pillar’, with 2 components directly contributing.  

The resilience of Latvia’s health system is expected to improve as a result of the measures 
proposed in the component on health (component 4). As the health sector has become one of 
the most vulnerable during the COVID-19 pandemic, strategic investments have the potential to 
improve its resilience and reduce its vulnerability to shocks. The reforms and related investments 
planned  in  the  RRP  focus  on  modernising  infrastructure  and  organisational  processes  to  ensure 
greater resilience  and preparedness  of the health system  for  epidemiological  crises.  The  reform 
shall  put  in  place  guidelines  for  integrated  care  and  epidemiological  preparedness,  while 
complementary investments in the necessary infrastructure of three university and seven regional 
hospitals will support the provision of integrated health services and will raise the capacity of health 
institutions to adapt to crisis situations. Improved human resources development shall be ensured 
through better planning, new remuneration model and improved training of health professionals. 
The long-term impact of these reforms shall be ensured if the measures are financed over the long 
run. 

The  institutional  resilience  of  the  public  administration  shall  be  strengthened  through 
reforms and investments included in the component on rule of law (component 6). To improve 
the institutional resilience and crisis response, the plan contributes to a broader reform plan for the 
modernisation of the public administration. The measures aim to strengthen policy development, 
implementation  and  evaluation  capacity,  increase  transparency  and  integrity  of  public 
administration,  attract  the  necessary  human  resources,  centralise  public  administration  support 
functions, and improve digital service delivery. This reform will be coupled with investments in 
professionalisation of public administration, training for horizontal policies, and fostering of the 
innovation capacity of the public sector. These actions contribute to strengthening the capacity and 
resilience  of  the  public  administration  that  in  return  should  improve  the  response  to  crisis,  and 
better support policy development and implementation. Furthermore, measures on strengthening 
NGOs  (6.3.1.4.)  also  contribute  to  the  ‘sixth  pillar’,  by  improving  representation  of  socially 
vulnerable groups in dialogue with public administration. 

6th Pillar: Policies for the next generation, children and young people, such as education and 
skills  

The plan extensively covers the ‘sixth pillar’, with 3 main contributing components.  

Policies  aiming  at  ensuring  access  to  quality  of  education  across  schools  and  regions 
(component 3) shall contribute to the ‘sixth pillar’. The inequality component shall support the 
efficiency of the network of general education institutions to ensure more equal access to quality 
education and bridging the urban rural divide. The mobility of students while optimising the school 
network shall be ensured through purchase of zero-emission vehicles for the municipalities. The 

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digital component includes pilot project on “computer libraries” that aim to ensure not only access 
to technology, but also to develop a framework for remote learning and in each municipality and 
to all schoolchildren. 

Measures on higher education under the productivity component (component 5) shall also 
contribute  to  this  pillar.  A  comprehensive  reform  of  governance  and  financing  of  the  higher 
education  institutions  is  expected  to  improve  their  efficiency,  quality,  promote  excellence  and 
international competitiveness in higher education. The structural changes are set to contribute to 
higher quality study programmes and equip students with the knowledge and skills required for the 
labour market. 

Measures  to  equip  people  with  the  skills  required  for  the  labour  market,  included  in  2 
components (components 2 and 3), shall also contribute to the ‘sixth pillar’. The component 2 
on digital transition includes reforms aimed to create sustainable and socially responsible system 
for adult learning and improved skills management framework. It is envisaged to establish new 
approaches for the organisation of the adult learning process, notably by piloting the Individual 
Learning  Accounts  for  individual  needs-based  adult  learning  and  the  Skills  Funds’  approach  to 
enterprise-  and  sector-based  adult  learning.  Investments  are  planned  for  development  of  digital 
skills for society, including for young people. Reskilling and upskilling measures for unemployed 
are also included in the component 3 on reducing inequalities as part of Active Labour Market 
Policy investments. 

Taking  into  consideration  all  reforms  and  investments  envisaged  by  Latvia,  its  Recovery  and 
Resilience plan represents, to a large extent a comprehensive and adequately balanced response 
to the economic and social situation, thereby contributing appropriately to all six pillars referred 
to in Article 3 of the RRF Regulation, taking the specific challenges and the financial allocation of 
Latvia into account. This would warrant a rating of A under the assessment criterion 2.1 in Annex 
V to the RRF Regulation. 

4.2. Link with country-specific recommendations and the European Semester  

The six components of Latvia’s plan cover a broad range of Latvia’s key challenges. Latvia’s 
plan includes measures addressing to varying extent all six broad challenges stemming from 2019 
and 2020 CSRs – fiscal, human capital, public administration, productivity and the twin transitions. 
The plan includes an extensive set of mutually reinforcing reforms and investments that contribute 
to effectively addressing a significant subset of the economic and social challenges outlined in the 
country-specific recommendations addressed to Latvia. These measures are expected to boost the 
growth  potential  of  the  economy  in  a  sustainable  manner.  The  recommendations  related  to  the 
immediate fiscal policy response to the pandemic can be considered as falling outside the scope of 
Latvia’s plan, notwithstanding the fact that Member State has generally responded adequately and 
sufficiently to the immediate need to support the economy through fiscal means in 2020 and 2021, 
in line with the provisions of the General Escape Clause. Moreover, the recommendation to achieve 
the medium-term budgetary objective in 2020 is no longer relevant, due both to the lapsing of the 
corresponding budgetary period and the activation in March 2020 of the General Escape Clause of 
the Stability and Growth Pact in the context of the pandemic crisis. 

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Fiscal  

Measures aim to improve compliance and reduce the shadow economy (CSR 1, 2019).  Weak 
tax compliance is a long-running issue in Latvia with undeclared transactions, undeclared income 
and tax fraud all being part of the problem. The component on rule of law through its reform and 
investment  strand  6.1.Reducing  the  shadow  economy  to  promote  fair  entrepreneurship  aims  to 
address the challenge to reduce the shadow economy and improve tax collection that relates to the 
2019 CSR on improving tax compliance. A National Institutions Work Plan for Restraining the 
Shadow  Economy  for  2021-2022  will  be  adopted  and  will  address  unregistered  and  illegal 
economic activity, undeclared employment, tax fraud and others. Investments will strengthen the 
analytics and data management in the field of tax administration and customs. The CSR on reducing 
taxation for low-income earners by shifting it to other sources (CSR 1, 2019) is not addressed in 
the plan. 

Further steps are taken to strengthen the anti-money laundering (AML) framework (CSR 1, 
2019  and  4,  2020).    The  anti-money  laundering  system  was  overhauled  in  2018.  In  particular, 
Latvia banned the servicing of non-resident shell companies and amended a number of laws. The 
capacity and capability of key supervisory, financial intelligence and law enforcement institutions 
was strengthened. Supervision of financial institutions has been tightened considerably. However, 
most  reforms  so  far  have  been  aimed  at  the  financial  sector.  Less  attention  has  been  paid  to 
recognise money laundering of domestic origin, which takes place mostly outside of the banking 
sector, e.g. through purchases of real estate, cars or other liquid valuables. Moreover, the police 
capacity has not received the level of attention that it deserves in this context. The plan is expected 
to  continue  work  on  the  implementation  of  the  AML  strategy  by  reforming  the  cooperation, 
information  exchange  and  training  systems  between  law  enforcement  agencies  involved  in  the 
identification,  investigation  and  trial  of  economic  crimes,  while  strengthening  their  technical 
capacity.  In  addition,  it  is  planned  to  strengthen  the  capacity  of  civil  society  organisations,  in 
particular, to improve the representation of interests of vulnerable groups. 

Human capital  

Investments  in  healthcare  partly  address  concerns  about  access,  quality  and  integration 
across care levels. Low public spending and unhealthy lifestyle choices are the main reasons for 
the population’s poor health outcomes. Timely and equal access to healthcare is limited. There is 
a shortage of health workers in Latvia, in particular nurses, which hinders the provision of health 
care and threatens the success of health reforms. Spending on health in Latvia remains among the 
lowest in the EU. Despite recent boosts in government spending on health, further financing and a 
sustainable solution for it is needed to address the longstanding shortcomings in health care. These 
challenges have been exacerbated in particular by the crisis caused by the COVID-19 pandemic. 
The component on health partly addresses the challenges related to resilience, accessibility, quality 
and cost-effectiveness of the health system and its human resources (CSR 2, 2019, CSR 1, 2020). 
The  health  component  aims  to  improve  the  resilience,  accessibility  and  quality  of  healthcare 
through two key reform strands – integrated healthcare and strengthening the health workforce. 
The  new  remuneration  model  for  healthcare  staff  shall  include  a  transparent  wage  calculation 
mechanism  and  streamlines  the  wages  across  the  health  sector  contributing  to  improving  the 
availability and quality of services. Significant investments are planned for the infrastructure in 
university  and  regional  hospitals,  as  well  as  in  secondary  outpatient  settings,  with  the  goal  of 
providing  integrated  health  services,  reducing  the  spread  of  infectious  diseases  and  meeting 
epidemiological requirements. The component does not contain measures for sustainable increase 
of the healthcare financing from the national budget (CSR 1, 2020). Complementary measures will 

30 

 
 
also be funded by the State budget and the Cohesion Policy funds, e.g. in primary care, disease 
prevention, eHealth and healthcare workforce, which will help address the CSRs further.  

Poverty reduction and social inclusion are addressed through reforms and investments, albeit 
their scope and ambition could be further scaled up.  The risk of poverty and social exclusion 
in Latvia is high, especially for vulnerable groups. In 2021, some progress has been noted on the 
2019 CSR 2 to address social exclusion, notably by improving the adequacy of minimum income 
benefits, and the 2020 CSR 2 to strengthen the social safety net. The plan seeks to further improve 
the  minimum  income  support  system,  including  through  an  annual  indexation  mechanism  and 
setting the threshold at 20% of median income, but it still remains below the poverty threshold. 
Other  investments  in  accessibility  and  rehabilitation  infrastructure  for  persons  with  reduced 
mobility  and  disabilities,  as  well  long-term  care  investments  for  elderly  will  also  contribute  to 
achieving some progress of the above CSRs and fight social exclusion.   The investment on growth 
of NGOs also contributes to addressing the 2019 CSR 2 on social exclusion and 2020 CSR 2 on 
strengthening the social safety net. The measure is welcome and a novel element in the current 
approach to inclusion of social vulnerable groups in Latvia.  

The quality and efficiency of the education system (CSR 2, 2019) is expected to be improved 
through reforms in general and higher education. The education system faces a challenge to 
consolidate  resources  while  improving  quality  and  efficiency.  While  Latvia’s  education  system 
performs well in terms of learning achievement, access to quality education remains dependent on 
the place of residence and type of school. At the same time, the implementation of a major school 
network reform was postponed and the higher education system remained fragmented. The plan 
addresses  the  challenges  linked  to  the  general  education  through  the  component  on  reducing 
inequality. It commits the entry into force of a legal framework that will establish quantitative and 
qualitative criteria for creating general secondary education establishments. As a result, it aims to 
create a network of general secondary education institutions in line with the demographic situation 
and reduce urban-rural divide in access to quality education. Infrastructure of 20 schools will also 
be improved and further investments are planned in the framework of the Cohesion Policy. The 
component on productivity puts forward an ambitious reform in higher education that focuses on 
consolidation,  modernising  the  governance  and  financing  model  of  the  higher  education 
institutions.  The  implementation  is  supported  with  investments  in  the  development  of  human 
capital  through  research  and  development  grants.  It  is  a  significant  contribution  to  an  overall 
transformation of the human resources’ system in R&I and to the improvement of higher education 
sector, including thanks to specialisation and research grants. It is therefore likely that the reform 
– once completed – would contribute substantially to the implementation of the CSR. 

Reforms and investments aim to ensure the skills, including digital skills, necessary for the 
labour market (CSR 2, 2019, CSR 2, 2020). Adult participation in learning and the involvement 
of the unemployed in active labour market measures is lower than the average of the European 
Union. Digital skills are insufficient at all levels, from basic to advanced. The low level of digital 
skills among the labour force limits the use of digital technologies by businesses and the potential 
for innovation. The CSRs are covered to a large extent as there is a strong focus on digital skills 
(all  levels)  and  adult  learning,  albeit  not  targeting  the  low-skilled  (CSR  2,  2019).  The  digital 
transition  component  envisages  reforms  that  would  ensure  the  necessary  skills  for  the  labour 
market  through  creating  sustainable  and  socially  responsible  system  for  adult  learning  and 
improved  skills  management  framework.  Pilot  projects  for  development  of  individual  learning 
accounts and enterprise and sector-based skills funds aim to remove barriers in access. Investments 

31 

 
 
 
are planned for the development of digital skills at all levels, developing the digital capacities of 
enterprises and investing in improving the digital skills of the public administration. Reskilling and 
upskilling measures for unemployed are included in the component on reducing inequalities as part 
of active labour market measures. These measures are also aligned with the flagship reskill and 
upskill included in the Commission’s Annual Sustainable Growth Strategy (COM/2020/575) and 
are complemented with funding from cohesion policy. 

Public administration and regional disparities 

Latvia’s rule of law component includes reforms aimed at strengthening the accountability 
and efficiency of public sector (CSR 4, 2020). The reforms are aimed at increasing the efficiency 
of tax administration, strengthening the competencies of the justice system, modernising public 
administration and improving the quality and efficiency of public procurement. The plan includes 
a  reform  entailing  the  centralisation  of  public  administration  support  functions  as  well  as 
investments in training to improve the capacity. The measures are part of a broader reform which 
aims  at  a  more  efficient,  better  motivated,  innovative  and  competent  public  administration 
addressing the CSR to a large extent. The creation of a justice school shall improve the training for 
the justice system and strengthen their competences and capacity to fight crime. The measures also 
aim  to  improve  the  quality,  efficiency  and  integrity  in  its  public  procurement  system,  improve 
competition and strengthen capacities as well as to ensure availability of information regarding the 
execution and actual performance of public contracts concluded. 

The plan builds on the administrative territorial reform to tackle regional disparities (CSR 
3, 2019).  There are significant regional differences in mobility and economic development, in the 
accessibility of public (health, education, administrative) services and integration with centres of 
economic  activity  of  the  surrounding  (functional  urban)  marginalised  territories.  In  2020  the 
Parliament approved the administrative territorial reform, which aims to reduce the number of local 
governments to 119 to 42 with the aim of creating economically viable administrative areas. In 
order  to  address  the  above-mentioned  challenges,  substantial  investments  are  planned  in  the 
renovation  of  roads,  industrial  parks,  municipal  transport,  schools  and  affordable  housing.  The 
latter  will  also  contribute  to  2019  CSRs  2  and  3  on  improved  quality  of  education  system  and 
affordable housing respectively. 

Investments in affordable housing (CSR 3, 2019) aim to remove barriers in labour mobility.  
Lack  of  affordable  housing  is  among  the  chief  barriers  to  labour  mobility  and  regional 
development. The plan aims to ensure a substantial progress on the 2019 CSR 3 on provision of 
affordable housing and investment-focused policies taking regional disparities into account. The 
component on inequality reduction includes the strategic framework on housing accessibility and 
entry into force of a new rental law ensuring a fair balance between the interests of the tenant and 
the  landlord.  Significant  investments  are  planned  to  develop  a  new  financial  instrument  to 
incentivize the construction of subsidized rental housing units in the regions to attract qualified 
labour  force.  This  provides  a  good  basis  for  further  measures  to  address  the  severe  housing 
deprivation in Latvia (among the highest in Europe), including with a national strategy for social 
housing and homelessness. Social housing is not covered by the RRP and remains part of 2021-
2027 Cohesion Policy framework.  

Productivity  

The measures on research and innovation (CSR 3, 2019) aims to increase productivity, lead 
to  considerably  higher  R&D  investments,  boost  competitiveness  and  foster  cooperation. 
Latvia’s  key  innovation-related  challenges  are  low  innovation  investment,  particularly  in  the 
32 

 
 
private sector, a shortage of highly-skilled human resources, and the fragmentation of innovation 
system governance. The plan addresses the CSR to focus investment-related policy on innovation. 
Latvia’s  ambition  is  to  pursue  an  ecosystem-based  innovation  policy  that  would  offer  support 
throughout the entire life cycle of innovation process, seek close cooperation between the system’s 
key stakeholders, and aim to improve the conditions for higher R&D investment by the private 
sector. The investments are planned for increasing the highly-skilled human resources in R&D, for 
the development of innovation clusters that would develop R&D capacity in enterprises, increase 
digital  skills,  promote  cooperation  of  all  representatives  and  increase  the  share  of  innovative 
enterprises in the economy, thereby promoting the volume of private R&D and the return on public 
investment. In the context of the modernisation of the public administration, it is also planned to 
foster the innovation culture and increase the innovation output within public administration.  

Green transition  

Investments  in  sustainable  transport,  energy  efficiency,  and  climate  change  adaptation  as 
well  as  reforms  fostering  investment  in  renewable  energy  are  expected  to  contribute  to 
address Latvia’s climate challenges (CSR 3 2019, CSR 3, 2020). Latvia’s main green transition 
challenges are to reverse the trend of growing energy consumption in transport and buildings as 
well as to continue increasing the share of renewable energy in its energy consumption. The Riga 
transport  reform  plans  investments  in  greening  urban  rolling  stock,  improving  public  transport 
infrastructure and constructing cycling lanes which are expected to contribute to both increasing 
the share of renewable energy used and reducing energy consumption in transport, both pertinent 
challenges to Latvia. Investments in energy efficiency renovations of public and multi-apartment 
buildings  will  contribute  to  reducing  their  energy  consumption.  Investments  in  modernising 
electricity grids aimed at facilitating development of microgeneration and extending the electric 
charging infrastructure to densely populated areas will help promote renewable energy use both in 
housing  and  transport.  Moreover,  Latvia  has  committed  to  study  ways  to  reduce  the  legal 
uncertainty for investments in wind energy. Coupled with measures to boost their acceptability 
among population, the planned measures will help boost private investment in wind energy, which 
is crucial to Latvia’s ability to reach its 2030 renewable energy targets. Furthermore, a support 
instrument to businesses will support a variety of climate friendly investments, including R&D for 
innovative products and technologies linked to the low carbon economy, climate change mitigation 
and  adaptation.  Finally,  investments  are  planned  in  anti-flood  infrastructure.  According  to  the 
plan’s estimates, the investments will yield 36 241 tonnes of savings in CO2 equivalent emissions 
and 49.8 GWh of primary energy savings. This amounts to 0.3% of Latvia’s total CO2 emissions 
and  0.1%  of  Latvia’s  primary  energy  consumption,  respectively.  The  estimates  are  admittedly 
cautious as they take into account only the direct effects of investments and do not consider the 
impact of reforms or synergies of the measures.  

Digital transition  

Latvia’s key digital challenges – poor skills, insufficient rural connectivity and low level of 
business digitalisation, are duly covered by Latvia’s plan. Low basic digital skills among the 
working age population, insufficient uptake of digital solutions by businesses, as well as a shortage 
of  ICT  specialists  are  Latvia’s  key  digital  challenges,  impacting  on  workforce  availability, 
competitiveness,  resilience,  use  of  government  e-services  and  innovation  alike.  Latvia’s  plan 
includes  sizeable  investments  in  basic  and  advanced  digital  skills  that  so  far  are  keeping  back 
Latvia’s digital transition. Latvia’s plan also includes measures for the digital modernisation of 
public  administration  and  the  digital  transformation  of  providing  public  services,  including 
centralised public solutions. Latvia addresses the digital CSRs (CSR 3, 2019, CSR 3, 2020) also 

33 

 
 
by supporting the digital transformation of businesses, in particular SMEs and creating a better 
environment for R&D as well as by creating the necessary framework for Latvia’s participation in 
the network of European Digital Innovation Hubs. Most urban areas in Latvia have excellent digital 
infrastructure, but fixed broadband take-up in rural areas, especially last-mile connections, is low. 
The plan includes continued and strengthened efforts to deploy very high-speed broadband that 
will  help  further  improve  the  digital  infrastructure.    Investments  in  digital  infrastructure  in  all 
regions of Latvia will also be financed from other EU funds. These measures are also aligned with 
the flagship modernise, connect and scale up included in the Commission’s Annual Sustainable 
Growth Strategy (COM/2020/575). 

Response to the economic and social situation 

The recovery and resilience plan represents to a large extent a comprehensive and adequate 
response  to  the  economic  situation  of  Latvia.  Continued  convergence  remains  Latvia’s  key 
challenge  both  in  terms  of  improving  its  population’s  living  standards  and  halting  emigration. 
Reforms  and  investments  are  needed  to  diversify  the  economy,  increase  its  level  of  technical 
advancement to generate higher value-added and make it more resilient and competitive, strengthen 
the investment in research and innovation and human capital and alleviate the socio-economic costs 
of the twin transition. The plan provides a comprehensive response to these challenges. In addition, 
Latvia’s business environment will also benefit from reforms and investments aimed to reduce the 
shadow economy and improve tax collection and those aiming to increase the availability of skilled 
workforce  and  stepping  up  efforts  to  improve  the  quality  and  availability  of  public  services 
provided digitally. The plan aims to improve participation in adult learning through sustainable and 
socially responsible system and better skills management. Investments are envisaged for upskilling 
and  reskilling  measures,  including digital skills that aim to equip the workforce with necessary 
skills  needed  for  the  labour  market.  Labour  market  participation  will  be  strengthened  through 
investments  in  active  labour  market  policies.  Increased  affordable  housing  provision  aim  to 
improve regional labour mobility. High risks of poverty and social exclusion are addressed through 
reform to improve the adequacy minimum income support, investments in long-term care for the 
elderly,  accessibility  infrastructure  and  rehabilitation  services  for  people  with  disabilities.  To 
address the inequalities of opportunity, reforms and investments are planned to improve the access 
to healthcare and access to quality education in regions. Policies to support the country’s digital 
and  green  transition  should  take  into  account  the  significant  regional  disparities.  Improving 
intermodal transport infrastructure within and around Riga would both facilitate labour mobility 
and help curb growing energy consumption from passenger cars. Measures are planned to address 
the  structural  weaknesses  of  the  current  innovation  policy  model,  strengthening  research  and 
innovation. 

Growth potential 

The challenges addressed by the plan would ensure a significant boost to the growth potential 
of the Latvian economy in a sustainable manner. Increasing productivity is a common thread 
across several components, namely, component 2 on digital transition, component 3 on reducing 
inequalities and component 5 on productivity. The planned measures shall contribute to addressing 
the  structural  weaknesses  of  the  current  innovation  policy  model  and  thus  have  a  long-lasting 
positive  impact.  In  this  regard,  the  long-term  sustainable  financing  model  will  be  key. 
Complementary investment in research and innovation is also foreseen under the component 1 on 
green transition, where support will be directed towards research and development of innovative 

34 

 
 
 
 
 
products  and  technologies  linked  to  the  low  carbon  economy,  climate  change  mitigation  and 
adaptation  and  thus  contributing  to  achieving  the  objectives  of  the  European  Green  Deal.  The 
digital transition  component  envisages reforms and investment that would ensure the necessary 
skills for the labour market through creating sustainable system for adult learning and investments 
in digital skills for transformation of society and government. With regard to the inclusiveness, the 
component on reduction of inequalities includes investments in training of the unemployed, which 
will allow for the expansion of active employment measures financed from the national budget and 
other EU instruments, as well as improve the skills of the Latvian population in general.  

Taking  into  consideration  the  reforms  and  investments  envisaged  by  Latvia,  its  recovery  and 
resilience  plan  is  expected  to  contribute  to  effectively  addressing  all  or  a  significant  subset  of 
challenges  identified  in  the  country-specific  recommendations,  or  challenges  in  other  relevant 
documents officially adopted by the Commission under the European Semester, and the recovery 
and resilience plan represents an adequate response to the economic and social situation of Latvia. 
This  would  warrant  a  rating  of  A  under  the  assessment  criterion  2.2  in  Annex  V  to  the  RRF 
Regulation.  

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Table 6:  Mapping of country challenges identified in 2019-20 country-specific 
recommendations and the Latvia’s RRP components 

n
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Country challenges 
(as identified in Section 2) 

Improve tax compliance 

Associated CSR (2019‐2020) 
and European Semester 
recommendations 

Fiscal sustainability 

2019.1.2, 2020.1.1 

Financial sector 

Strengthen anti‐money laundering framework 

2020.4.1 and 2019.1.3 

Resilience, accessibility, quality and cost‐
effectiveness of the healthcare system 
Additional human and financial resources to 
healthcare sector 

Healthcare  

2020.1.2 and 2019.2.3 

2020.1.2 

Education 

Quality and efficiency of the education system 
Training of low‐skilled and adult learning 
Skills, including digital skills 

2019.2.2 
2020.2.4 and  2019.2.2 
2020.2.4  and 2019.2.4 

○ 
● 

Strengthen the social safety by increasing minimum 
social benefits 
Active labour market policies 

2020.2.1 and 2019.2.1 

2020.2.4 and 2019.2.3 

Social inclusion 

Low innovation performance 

Research and innovation 

2020.3.4. and 2019.3.1. 

Investment 

Digital transformation and infrastructure 
Sustainability, resource efficiency and energy  
efficiency of  transport 
Clean and efficient production and use of energy 
Affordable housing 

2020.3.7., 2019.3.5. 

● 

2020.3.6, 2019.3.3. 

2020.3.5, 2019.3.4. 
2019.3.2. 

● 

● 

Public administration and business climate 

y
t
i
l

a
u
q
e
n

i

w
a

l

f
o
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u
R

l

:
6
t
n
e
n
o
p
m
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C

○ 

● 

e
r
a
c
h
t
l
a
e
H

:
4
t
n
e
n
o
p
m
o
C

● 

○ 

y
t
i
v
i
t
c
u
d
o
r
P
:
5
t
n
e
n
o
p
m
o
C

● 

● 

○ 

○ 

○ 

f
o
n
o
i
t
c
u
d
e
R

:
3
t
n
e
n
o
p
m
o
C

● 

○ 

○ 

● 

○ 
○ 

● 

Accountability and efficiency of public 
administration 
Regional disparities  

2019.4.1. 

2019.4.1. 

● 

● 

○ 

Key: “●” investments and reforms of the component significantly address the challenge; “○” the component 
partially addresses the challenge 

36 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.3. Growth  potential,  job  creation,  economic,  institutional  and  social  resilience, 
European  Pillar  of  Social  Rights,  mitigating  the  impact  of  the  crisis,  and  social 
territorial cohesion and convergence 

The plan aims to accelerate Latvia’s economic recovery by increasing aggregated demand through 
investments and reforms. The main objectives of the plan are to improve Latvia’s growth potential, 
job  creation,  and  economic,  social  and  institutional  resilience  that  will  ultimately  reduce  the 
country’s vulnerability to shocks. The plan is also aimed at contributing to the implementation of 
the European Pillar of Social Rights, including through the promotion of policies for children and 
youth, and to mitigating the economic and social impact of the COVID-19 crisis, thereby enhancing 
the economic, social and territorial cohesion and convergence within the Union. 

Fostering economic growth and jobs 

The  plan’s  estimated  impact  on  GDP  and  employment  is  notably  cautious.  Latvia’s  plan 
estimates its impact on cumulative GDP growth to be 0.6% in 5 years and 1.5% in 20 years. Its 
impact on employment is estimated at 0.2% and 0.7% in 5 and 20 years, respectively. The model 
used to assess the quantitative impact assumes both demand and supply side effects of the planned 
investment,  however  it  does  not  consider  the  impact  of  reforms.  Moreover,  the  model  assumes 
some replacement of baseline public investment. The plan’s medium-term impact appears slightly 
cautious  given  the  plan’s  size  of  around  6%  of  GDP.  Spread  over  5  years  and  assuming  some 
investment  replacement  effects  as  well  as  some  import  leakage,  the  demand  effects,  which  are 
expected to dominate at the 5-year mark, appear reasonable. However, the time profile of the GDP 
impact  assessment  points  to  an  inexplicably  low  impact  in  the  first  years  of  the  plan’s 
implementation.  The  supply  side  effects,  measured  at  the  20-year  mark,  translate  to  0.07%  of 
additional annual GDP growth that results from initial investment worth around 6% of GDP, which 
implies a rather cautious return on investment. The main contributions to both economic growth 
and employment are expected to come from investments in the green and digital transitions as well 
as investments in social inequalities and territorial cohesion. In the long term, these three areas are 
projected  to  generate  nearly  three  quarters  of  the  overall  contribution  to  the  higher  growth  and 
employment potential. Overall, the plan’s quantitative assessment of its economic and employment 
impact is cautious. 

Latvia’s Stability programme for 2021 points to a clear macro-additionality of Latvia’s plan. 
The  average  public  investment  level  in  the  three  years  before  the  crisis  was  5.1%  of  GDP.  It 
occurred during an upswing of EU-financed investments and therefore represents the high side of 
Latvia’s public investment level. According to Latvia’s Stability Programme, the public investment 
level is expected to be significantly above the pre-crisis level at 5.9% of GDP on average over 2021 
to 2024. Total public expenditure reaching 42.6% of GDP for years 2021 to 2024 is also forecast 
to significantly exceed the pre-crisis levels of 38.8% of GDP on average over 2017 to 2019. 

37 

 
 
 
 
Box 2. Stylised NGEU impact simulations with QUEST – Latvia 

Model simulations conducted by the Commission using the QUEST model show that the economic 
impact of the NGEU in Latvia could lead to an increase of GDP of between 1.3% and 2.0% by 20261. 
After 20 years, GDP could be 0.7% higher. Spillovers account for a large part of such impact.  

According to these simulations, this would translate into up to 7,000 additional jobs. Cross border (GDP) 
spillovers account for 0.5 pps in 2026, showing the value added of synchronised expenditure across Member 
States (line 2). Even in a scenario with a lower productivity of NGEU funds, it would still lead to a significant 
impact (line 3)2.  

Table 1: QUEST simulation results (%-deviation of real GDP level from non-NGEU case, linear 
disbursement assumption over 6 years)  

Scenario 
Baseline 
   of which spillover 
Low productivity 

2021  2022  2023  2024  2025  2026  2027  2028  2029  2030  2040 
0.7 
2.0 
0.0 
0.5 
0.3 
1.3 

1.1 
0.4 
0.8 

1.8 
0.5 
1.3 

1.1 
0.2 
0.4 

1.8 
0.5 
1.4 

1.0 
0.3 
0.3 

1.8 
0.5 
1.2 

1.9 
0.5 
1.3 

1.1 
0.3 
0.3 

1.5 
0.4 
0.8 

This stylised scenario does not include the possible positive impact of structural reforms, which can 
be substantial. A model-based benchmarking exercise shows that undertaking structural reforms that would 
result in halving the gap vis-à-vis best performers in terms of indicators of structural reforms could raise 
Latvian GDP by around 11% in 20 years time, in line with findings for the EU average3. 

Due to the differences in the assumptions and methodology, the results of this stylised assessment cannot 
be directly compared to the numbers reported in chapter 4 of Latvia’s RRP.  

1 RRF amounts to roughly 90% of NGEU, which also includes ReactEU, Horizon, InvestEU, JTF, Rural Development 
and RescEU. 
2 Technically, the low productivity scenario considers a significantly reduced output elasticity of public capital. 
3 Varga, J, in 't Veld J. (2014), “The potential growth impact of structural reforms in the EU: a benchmarking exercise” 
,European Economy Economic Papers no. 541. 
http://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp541_en.pdf. 

Investments in human capital, digital capacities, innovative capacity and public transport are 
expected  to  have  the  largest  impact  on  the  economy’s  long-term  potential.  Latvia’s  plan 
foresees investments and reforms aimed at boosting the population’s skills, which have been among 
Latvia’s key challenges as evidenced by high unemployment rate differences between the high and 
the low skilled. There has also been a recurring trend of shortages of qualified workforce and tight 
labour  supply,  aggravated  by  aging  and  declining  population  and  emigration.  Achieving  a 
structural improvement in the workforce’s skills composition has the potential to provide a boost 
to  the  use  of  digital  solutions,  innovation,  services  exports  and  spur  regional  development. 
Furthermore,  investments  in  modernising  public  IT  infrastructure,  support  for  business 
digitalisation as well as investments in 5G passive infrastructure on the one hand and investment 
in digital skills on the other hand are expected to lead to synergies that have the potential to boost 
the country’s capacity for use of digital solutions. Moreover, support for private R&D investments 
are  aimed  at  creating  sustainable  innovation  ecosystems  that  will  boost  Latvia’s  innovation 
capacity  in  the  long  term.  Finally,  the  reform  of  the  governance  of  the  Riga  metro  area  public 
transport system as well as its associated investments are aimed at improving public transport’s 
attractiveness and achieve a higher proportion of mobility needs being served by public transport. 
This will not only limit the rise in energy consumption due to increasing use of private cars, but 
also improve access to services, labour mobility and transport productivity. If achieved, such an 

38 

 
 
 
 
outcome  would  improve  the  competitiveness  of  the  Riga  metro  area  and  therefore  increase  its 
growth potential. 

The broad-ranging reform of the higher education aims to boost the quality and efficiency of 
higher education and deliver better skills to Latvia’s population in the longer term. Latvia’s 
higher education sector is characterised by a large number of small higher education institutions 
(HEIs)  that  are  underfunded.  As  a  result,  most  HEIs  lack  resources  to  deliver  good  quality 
education and to create critical mass for high quality research. The reform of the higher education 
system  consists  of  several  elements  –  changes  to  the  governance  of  the  HEIs,  changes  to  the 
accreditation mechanism and funding principles, as well as instruments to incentivize consolidation 
among the HEIs. The changes in the governance will separate HEIs’ administrative and academic 
management and thus make them more transparent, efficient and open. The introduction of HEIs 
typologies and cyclical accreditation combine with the changes to the financing model are expected 
to ensure higher standard of HE programmes and better alignment of HEIs’ incentives with their 
academic  performance.  Finally,  the  RRP  will  finance  grants  that  will  incentivise  HEI  mergers, 
which should help concentrate the scarce resources both in higher education and academic research. 
Altogether, the proposed reforms should improve Latvia’s skills level and innovative capacity over 
medium term and beyond.  

The  substantial  construction  works  related  to  the  plan’s  green  transition,  health  and 
inequality components are expected to foster job creation over the medium term. Investments 
in bike lines, mobility hubs, tram line extensions, buildings’ energy efficiency, fire rescue centres, 
flood protection infrastructure, hospitals and ambulatory care facilities, road renovation, industrial 
parks, affordable housing, social facilities and customs facilities will involve major construction 
works which will considerably boost labour demand during their implementation. The volatility of 
public investments has in the past caused adverse effects on the construction sector which had to 
downsize  or  ramp  up  its  capacity  depending  on  the  demand.  Therefore,  in  order  to  avoid  these 
adverse  effects,  it  is  crucial  that  the  RRF-funded  investments  are  integrated  within  the  broader 
public investment planning, including other EU-funded investments.   

Strengthening social cohesion  

Investments and reforms in social inclusion and healthcare are expected to strengthen social 
cohesion and social protection.  The introduction of the indexation of minimum income benefits 
will  ensure  they  will  be  annually  adjusted  to  the  wage  growth  and  thus  their  adequacy  levels 
maintained.  Under  the  previous  system,  indexation  of  minimum  income  benefits  followed  a 
haphazard pattern which in practice led to their decrease in real terms over the previous eight years. 
This measure is expected to improve the livelihoods of some of the most vulnerable parts of the 
society and therefore contribute to Latvia’s social cohesion. Combined with the increase of the 
minimum  income  benefits  from  around  10%  of  median  income  to  20%  which  was  introduced 
starting from 2021, these measures are expected to improve Latvia’s performance on the Social 
scoreboard, where income inequality and the impact of social transfers have been Latvia’s main 
challenges.  Furthermore,  investments  in  health  infrastructure  combined  with  a  reform  aimed  to 
attract more human resources to the sector are expected to improve accessibility of healthcare, the 
lack of which has predominantly affected the low-income earners and people living in peripheral 
areas. The plan is expected to also contribute to the implementation of several principles of the 
European Pillar of Social Rights (EPSR), such as education, training and life-long learning; active 
support  to  employment;  minimum  income;  right  to  timely  access  to  affordable,  preventive  and 
curative health care of good quality; inclusion of people with disabilities; long-term care; access to 
essential services. 

39 

 
 
Latvia’s  plan  contains  some  measures  that  are  expected  to  contribute  to  addressing  the 
country’s challenges in the area of gender equality and equal opportunities for all. The plan 
foresees  an  investment  to  address  specific  needs  of  persons  with  disabilities,  such  as  ensuring 
accessibility of public and private buildings. In addition, all new public transport vehicles will be 
equipped with easy access for older persons and persons with reduced mobility.  

The situation of socially vulnerable groups is addressed in several parts of the plan, such as in those 
dealing  with  health.  The  plan  also  includes  measures  to  improve  educational  opportunities  for 
school children.  

As regards gender equality, the plan includes measures aiming specifically at women’s engagement 
in ICT career opportunities, with a view to increase the gender balance among ICT specialists. The 
labour  market  situation  for  female  jobseekers  is  expected  to  be  improved  by  targeted  measures 
aiming at the promotion of reconciliation of work and family life through the creation of remote 
and part-time work opportunities for parents with children. 

The plan foresees that the management and implementation of projects ensure equal pay for work 
of equal value for women and men and diversity in management. In addition, the selection process 
of  projects  will  be  subject  to  the  principle  of  non-exclusion  and  the  obligation  to  combat  any 
discrimination based not only on sex, but also on grounds of race or ethnic origin, religion or belief, 
disability, age, and sexual orientation. 

Reducing vulnerabilities and increasing resilience 

Sound fiscal and economic policy over the past decade have ensured Latvia’s macroeconomic 
resilience  in  face  of  the  COVID-19  pandemic.  Latvia  entered  the  pandemic  with  low  budget 
deficit  and  a  public  debt  level  below  40%  of  GDP.  Its  current  account  had  remained  broadly 
balanced over the previous 5 years and private sector debt level at 90% of GDP was also among 
the lowest in the EU. The strong macroeconomic fundamentals meant Latvia could increase public 
debt to support the economy during the shutdowns and the private sector also remained resilient to 
the temporary drop of income. Its main macroeconomic challenge was related to the rapid wage 
growth caused by declining labour supply. This led to a fairly rapid appreciation of unit labour 
costs, which in turn threatened Latvia’s price competitiveness. The falling labour supply is part of 
a broader set of challenges related to Latvia’s demographic composition and the response to these 
challenges is closely linked with Latvia’s long-term productivity growth, reduction of social and 
regional  inequalities.  Latvia’s  plan  contains  measures  addressing  all  three  of  these  areas,  as 
discussed in the relevant sections of this assessment.  

Latvia’s  plan  includes  a  number  of  reforms  aimed  at  addressing  challenges  related  to  its 
capacity  for  effective  policy  implementation  and  fostering  a  growth-friendly  business 
environment. Latvia’s rule of law component includes most of the plan’s key reforms – increasing 
the  efficiency  of  tax  administration,  strengthening  the  competencies  of  the  justice  system, 
modernizing public administration and improving the quality and efficiency of public procurement. 
Moreover, the reform measures aimed at fostering private investments in wind energy, discussed 
above, are also expected to contribute to the effectiveness of policy implementation.  

Measures aimed at reducing the size of shadow economy and therefore generate more budget 
revenue and contribute to a fairer and more competitive business environment. The measures 
aimed  at  improving  the  tax  administration  include  drawing  up  an  action  plan  for  fighting  tax 
evasion and fraud, introducing a taxpayer segmentation system and adjusting the audit and control 
practices to better target the risk of non-compliance. The plan also includes investments in research 

40 

 
 
of taxpayer behaviour that would be used to design a more effective policy response. Altogether, 
the measures are expected to yield better tax compliance and a more efficient tax administration. 
Better tax compliance should lead to improved conditions for competition and business investment 
through higher credit growth and help fund needed social and health programmes.  

Investments into training for the justice professionals will strengthen the system’s capacity 
to address crime and support a growth-friendly business environment. The introduction of a 
justice  school  would  unify  the  training  of  all  judges,  prosecutors,  staff  of  courts  and  public 
prosecution offices, and specialised investigators under the roof of a single institution. This will 
allow to set coherent training objectives, develop unified training programmes, enhance exchange 
of  experience  among  the  different  branches  of  the  judicial  system,  and  allow  for  better  quality 
training through better resource efficiency.  Over the medium term this improvement should lead 
to a strengthened justice system’s capacity to fight crime and economic crime, in particular. To this 
end,  it  would  however  be  important  that  the  judiciary  itself  be  involved  in  the  governance, 
supervision and setting of priorities of the new Justice School, in line with European standards. 
Latvia faces several challenges related to economic crime – tax evasion and fraud, smuggling, and 
money laundering. Moreover, inefficient and unpredictable treatment of insolvency cases in the 
wake  of  the  previous  crisis  was  a  major  challenge  until  a  few  years  ago  when  the  system  was 
reformed. Therefore, a competent, efficient and adequately equipped justice system is crucial to 
fostering trust in Latvia’s business environment.  

Steps to modernise public administration will help build Latvia’s capacity to deliver better 
policy and its implementation. In the wake of the COVID-19 crisis Latvia’s response to the health 
crisis, economic support and containment policy was made more difficult by insufficient capacity, 
expertise and experience in dealing with health crisis of such scale and its economic and social 
consequences and ensuring efficient and timely inter-institutional coordination of the response to 
the crisis. This was particularly evident during the onset of the second wave of the pandemic in 
autumn of 2020. In this context, it is particularly pertinent to address the weaknesses of the public 
administration.  The  plan  includes  a  reform  entailing  the  centralisation  of  public  administration 
support functions. Moreover, it includes the development of a new framework and investments in 
training for horizontal competencies like ethics, integrity and anti-corruption as well as specialised 
competencies  like  policy  design,  project  management,  procurement  and  others.  Furthermore,  it 
includes  measures  to  strengthen  the  public  innovation  capacity  through  adjusting  the  legal 
framework, attracting the necessary human resources as well as investing in infrastructure. These 
measures form a part of a broader plan for the modernisation of public administration, which will 
also be delivered as part of the plan and which will include a comprehensive plan to achieve a more 
efficient, better motivated, innovative and competent public administration.  

Provisions  to  improve  the  legal  framework  to  foster  competition,  improve  capacity  of 
procurers,  and  measures  to  improve  efficiency  are  expected  to  make  Latvia’s  public 
procurement system more effective and resilient. Latvia’s public procurement system generally 
performs well on key parameters like transparency, efficiency, award criteria, and others. However, 
it has a relatively high share of tenders with only a single bidder and the system has occasionally 
found it challenging to deal with high value and complex procurement projects often due to lack 
of adequate capacity of public procurers. Latvia’s plan includes measures aimed at addressing those 
weaknesses as well as improvements in areas where it already performs well. Stricter requirements 
for procurers to conduct market consultation should lead to more competitive bidding for public 
contracts.  A  standardised  competency  and  training  framework  should  improve  the  overall 
competency  of  public  procurers  and  lead  to  better  quality  outcomes,  especially  for  the  more 

41 

 
 
complex projects. Latvia also plans to improve the transparency of its system by introducing new 
disclosure requirements. Finally, Latvia will study the best approach to centralising procurement 
and  depending  on  the  results  of  the  study  will  centralising  procurement  in  certain  areas.  The 
measures included in Latvia’s plan should lead to overall improved quality, efficiency and integrity 
of its public procurement system and will help with the quality of implementation of the plan itself. 

Cohesion and convergence  

Territorial administrative reform coupled with investments in affordable housing, industrial 
infrastructure, schools and regional roads comprise Latvia’s efforts to help its lagging regions 
develop. Latvia ‘s income level remains significantly below EU average, besides there are marked 
income  level  differences  within  the  country  –  with  Riga  and  its  surroundings  enjoying 
approximately  twice  the  income  level  of  the  rest  of  the  country.  The  peripheral  regions  have 
suffered from a vicious cycle of labour emigration and diminishing work opportunities on the one 
hand and dwindling resources for essential public services on the other hand. Latvia’s plan refers 
to  the  recently  adopted  administrative  territorial  reform,  which  will  merge  the  number  of 
municipalities from 119 to 42, thus making them stronger and better capable to ensure provision 
of  quality  public  services  and  to  make  the  investments  necessary  to  create  more  employment 
opportunities. Building on this reform, Latvia’s plan includes measures that would improve public 
services and their accessibility, through investments in social infrastructure, schools, hospitals and 
roads.  Furthermore,  it  includes  investments  in  affordable  housing  and  industrial  infrastructure. 
Investments in affordable housing should  help  foster labour supply for businesses  in peripheral 
regions  which  has  been  hampered  by  lack  of  housing  opportunities  in  the  places  with  the  best 
employment opportunities. Investments in industrial infrastructure are aimed at attracting private 
sector investors to these regions, but should be based on the assessment of the local potential, a 
thorough  mapping  and  take  into  account  integrated  regional  development  strategies.  Taken 
together,  these  measures  make  up  a  significant  effort  of  creating  better growth  opportunities  in 
peripheral regions and therefore reducing the regional disparities. 

Taking  into  consideration  all  reforms  and  investments  envisaged  by  Latvia,  its  recovery  and 
resilience  plan  is  expected  to  have  a  high  impact  on  strengthening  the  growth  potential,  job 
creation, and economic, social and institutional resilience of the Member State, on contributing to 
the implementation of the European Pillar of Social Rights, including through the promotion of 
policies for children and youth, and on mitigating the economic and social impact of the COVID-
19 crisis, thereby enhancing the economic, social and territorial cohesion and convergence within 
the Union. This would warrant a rating of A under the assessment criterion 2.3 of Annex V to the 
RRF Regulation. 

42 

 
 
Box  3:    Employment  and  social  challenges  in  light  of  the  Social  Scoreboard 
accompanying the European Pillar of Social Rights 

The Social Scoreboard supporting the European Pillar of Social Rights points to a number of employment 
and social challenges in Latvia. The COVID-19 crisis has slowed down the positive economic and labour market 
developments observed in Latvia in the past years, and risks leading to an increase in the share of people at risk of 
poverty or social exclusion. While the employment rate remained among the highest in the EU in 2020 (77.0 % vs 
72.4% EU average), the unemployment rate has increased significantly to 8.1 % from 6.3 % in 2019 (EU average: 
7.1%). Although increasing, net earnings of a full-time single worker on average wage remain weak. Access to 
affordable  healthcare  is  a  challenge  and  self-reported  unmet  needs  for  medical  care  are  still  high,  although 
decreasing. 

Social Scoreboard for LATVIA

Equal 
opportunities 
and access to 
the labour 
market

Early leavers from education and training 
(% of population aged 18‐24) (2020)

Youth NEET 
(% of total population aged 15‐24) (2020)

Gender employment gap (2020)

Income quintile ratio (S80/S20) (2019)

At risk of poverty or social exclusion (in %) (2019)

Employment rate 
(% population aged 20‐64) (2020)
Unemployment rate 
(% population aged 15‐74) (2020)

Long term unemployment 
(% population aged 15‐74) (2020)

GDHI per capita growth (2019)

Dynamic 
labour 
markets and 
fair working 
conditions

Net earnings of a full‐time single worker earning 
AW (2019)

Impact of social transfers (other than pensions) on 
poverty reduction (2019)

Social 
protection and 
inclusion

Children aged less than 3 years in formal childcare 
(2019)

Self‐reported unmet need for medical care (2019)

Individuals' level of digital skills (2019)

Critical 
situatio n

To  
watch

Weak but 
impro ving

Go o d but to  
mo nito r

On 
average

B etter than 
average

B est 
perfo rmers

Update of 29 April 2021. Members States are classified on the Social 
Scoreboard according to a statistical methodology agreed with the EMCO and 
SPC Committees. It looks jointly at levels and changes of the indicators in 
comparison with the respective EU averages and classifies Member States in 
seven categories. For methodological details, please consult the Joint 
Employment Report 2021; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income.

Despite the pandemic, Latvia has improved in terms of 
its rate of young people not in education, employment or 
training (NEET). The figure decreased from 7.9 % in 2019 
to 7.1% in 2020 and is now among the best performers in the 
EU (average 11.1%). This was achieved through upskilling 
measures  for  students  and  a  temporary  unemployment 
benefit for young graduates during the pandemic in 2020. At 
the same time, while the overall rate of early school leavers 
remains  well  below  the  EU  average  (7.2%  vs  10.1  %  in 
2020),  rural-urban  disparities  (11%  in  rural  areas)  are 
present  alongside  more  general  regional 
inequalities. 
Latvia’s gender employment gap remains among the lowest 
in the EU with over 75% of women in employment.  

to  persist 

Although improving, several social inequality indicators 
in 
remain  critical.  Disparities  continue 
employment across regions and skills levels as the situation 
worsens for the unemployed, older people and persons with 
disabilities.  Income  inequality  (S80/S20)  is  among  the 
highest in the EU, despite a slight decrease from 6.8 in 2018 
to 6.5 in 2019. Risks of poverty or social exclusion remain 
critical,  alongside  self-reported  unmet  needs  for  medical 
care,  despite  a  small  improvement.  At  the  same  time,  the 
impact of social transfers (other than pensions) in reducing 
poverty remains low. Finally, the share of individuals with 
basic  digital  skills  dropped  to  43%  in  2019,  reversing  the 
previous trend of approaching the EU average of 56%.  

Access to social housing remains limited. The availability 
of social housing continues to be scarce and waiting lists are 
long due to limited funding and lack of a strategic approach. 
Government support for low-income households to improve 
access  to  housing  includes  mainly  housing  allowances 
(covering  rent  payment  and  payment  for  utilities)  but  the 
coverage is low. The share of people facing severe housing 
deprivation (12.7 % vs. the EU average of 3.8 %) and that of 

people facing overcrowding are among the highest in the EU. 

The Recovery and Resilience Plan submitted by Latvia addresses some of the social and regional inequalities, 
skills,  labour market and health-related challenges  relevant for  the implementation of  the  Pillar.  The Plan 
includes measures in support of the administrative territorial reform, the minimum income reform (including annual 
indexation),  and  healthcare  reform.  Special  attention  is  paid  to  reskilling  and  upskilling,  including  piloting  of 
Individual Learning Accounts and improving digital skills for all groups of the population. Although some actions 
targeting long-term care and improved accessibility for persons with disabilities are foreseen, their ambition does 
not match the considerable needs for social investments, even with additional funding from cohesion funds. The 
healthcare  component  is  organized  around  two  reforms  -  integrated  healthcare  and  strengthening  the  health 
43 

 
 
 
 
 
workforce. The investments seek to improve accessibility, quality and resilience of healthcare, notably by upgrading 
the hospital and outpatient clinic infrastructure, including in the regions. The component does not entail commitments 
for a sustainable solution to increase healthcare financing from the national budget.  
To mitigate the negative impact of the COVID-19 pandemic and the economic crisis, Latvia has implemented 
a number of measures in the social and employment area, ranging from laptops to disadvantaged children for 
remote  learning  to  various    benefits  to  the  unemployed  and  families  with  children,  as  well  as  short-time  work 
schemes. For example, unemployment benefits were extended to young graduates and a one-off family benefit of 
500 EUR paid for each child. Some measures  in the RRP are expected to boost their impact, such as Active Labour 
Market Policies for unemployed and job-seekers, and purchase of laptops to set up “computer libraries” in schools.  

4.4. The principle of ‘do no significant harm’  

Latvia’s recovery and resilience plan assesses compliance with the ‘do no significant harm’ 
(DNSH)  principle.  The  assessment  follows  the  methodology  set  out  in  the  Commission’s 
Technical  guidance  on  the  application  of  ‘do  no  significant  harm’  under  the  Recovery  and 
Resilience Facility Regulation (2021/C 58/01). It covers the six environmental objectives within 
the meaning of Article 17 of Regulation (EU) No 2020/852, namely climate change mitigation, 
climate change adaptation, sustainable use and protection of water and marine resources, circular 
economy,  pollution  prevention  and  control,  and  protection  and  restoration  of  biodiversity  and 
ecosystems. The environmental impact is assessed at measure-level, i.e. one individual assessment 
per reform or investment. The 24 reforms and 61 investments in Latvia’s recovery and resilience 
plan  translate  to  95  ‘do  no  significant  harm’  assessments  (with  specific  assessments  for  sub-
components of measures). 

Each  ‘do  no  significant  harm’  assessment  follows  a  two-step  approach.  In  a  first  step,  it  is 
assessed if there is a risk that a measure could do significant harm to any of the environmental 
objectives. In some cases, the assessment concludes that there is no risk of significant harm, in 
which  case  the  measure  is  assessed  as  compliant  with  this  objective  of  the  regulation.  In  cases 
where  the  analysis  identifies  a  risk,  a  more  detailed  assessment  is  performed  in  which  Latvia 
demonstrates the absence of significant harm. 

Where needed, the requirements of the DNSH assessment are enshrined in the design of a 
measure  and  specified  in  a  milestone  or  target  of  this  measure.  This  ensures  that  any 
disbursement  for  the  respective  measures  can  only  be  made  once  compliance  with  the  DNSH 
principle  is  ensured.  For  instance,  regarding  the  different  horizontal  schemes  of  the  plan  in  the 
digital and industrial sectors (measures 2.2.1.2i., 2.2.1.3i., 2.2.1.4i., 2.3.1.2.i., 3.1.1.3i.), the DNSH 
assessment  states  that  investments  will  exclude  sectors  incompatible  with  DNSH  and  this  is 
integrated in the milestones of each measure.  

Latvia’s  recovery  and  resilience  plan  puts  particular  focus  on  sustainable  mobility  with 
measure  1.1.1  Riga  Transport  reform.  This  notably  entails  investments  in  railway  and  public 
transportation which could potentially represent harm to the objective of climate mitigation. This 
will be prevented by a focus on electrification regarding rail (with the purchase of seven battery 
electric trains) and the financing of zero-emission vehicles regarding other transport investments 
(electric buses, trams). Potential harm to the objective of circular economy is also addressed in the 
DNSH assessment: for instance, for the vehicles acquired under 1.1.1.2i. Environmentally friendly 
improvements to the public transport system of the city of Riga, it is planned that after the end of 
the vehicle’s life cycle, they will be disposed of in accordance with the requirements of Directive 

44 

 
 
2000/53/EC  on end-of-life vehicles10. Similarly, for complementary infrastructure, it is planned 
that waste generation during construction will be limited in accordance with the EU construction 
and demolition waste management protocol and reuse and high-quality recycling of materials will 
be encouraged. 

The plan also has a strong pillar focused on energy efficiency improvement (subcomponent 
1.2).  While this has a positive impact on emission reductions, it can also create significant amounts 
of construction waste. Latvia ensures that there will be no significant harm to the circular economy 
objective by detailing in the plan for each of the measures that at least 70% (by weight) of the non-
hazardous construction and demolition waste generated on the construction sites will be prepared 
for reuse, recycling and other material recovery. 

The plan also has a strong pillar focused on climate adaptation (subcomponent 1.3). While 
this naturally contributes to one of the six climate objectives under the DNSH assessment, it could 
nonetheless  represent  a  risk  to  other  environmental  objectives.  For  instance,  to  address  risks  to 
circular economy, measure 1.3.1.1i. Strengthening the capacity of the rescue services confirms that 
demolition and construction operators will ensure that 70 % (weight) of hazardous, construction 
and demolition waste will be properly collected and disposed of. 

Particular attention is paid to measures whose impact on environmental objectives warrants 
close scrutiny. Regarding measure 3.1.1.1.i. Improvement of the national network of regional and 
local roads, the recovery and resilience plan proposes to upgrade the quality of existing national 
regional and local roads (indicatively 210 km) to ensure better accessibility of the municipality’s 
administrative centres. In order to prevent risks to climate mitigation, investments in regional roads 
should  emphasise  road  safety,  address  bottlenecks  and  negative  externalities  arising  from  road 
transport,  and  promote  a  shift  towards  more  sustainable  mobility,  such  as  by  facilitating  and 
prioritising  public  transport.  A  positive  element  is  that  this  measure  is  accompanied  by  the 
acquisition of zero-emission vehicles: “3.1.1.6i.i. Purchase of zero-emission vehicles for municipal 
functions  and  services  which  focuses  on  electricity-powered  school  buses  as  a  complementary 
investments that will reduce GHG emissions. The Latvian plan also puts forward the acquisition 
of zero-emission vehicles under 1.1.1 Riga Transport Reform. Similarly, with measure 1.3.1.2.i. 
the 
infrastructure, 
Investments 
implementation  of  29  projects,  including  the  renovation  of  the  polder  pumping  stations,  the 
restoration of protective dikes and the rehabilitation of the regulated sections of the rivers. While 
this measure contributes to climate adaptation and will aim to protect 59000 ha from flooding, it 
could  lead  to  significant  harm  to  biodiversity  and  the  good  status  of  water  bodies.  Harm  is 
nevertheless prevented by conducting an Environmental Impact Assessments and corresponding 
mitigations measures have been identified and reflected in each of the 29 projects. Moreover, a 
specific milestone shall ensure that no harm to biodiversity and the good status of water results 
from  the  measure  and  that  the  measure  is  compliant  with  the  Birds  Directive  (Directive 
2009/147/EC), the Habitats Directives (Council Directive 92/43/EEC) and the Water Framework 
Directive (Directive/2000/60/EC). 

investments  will  contribute 

flood  risk  reduction 

in 

to 

The plan also includes a number of regulatory reforms (in the social field for instance measure 
3.1.2.5.i.  Participation  in  the  labour  market  of  unemployed,  jobseekers  and  people  at  risk  of 
unemployment and measure 3.1.2.1i. Measure to promote access to public services and employment 
for people with disabilities) or more generally measures related to health (Component 4) or rule of 

10 Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on end-of life 
vehicles.  

45 

 
 
                                                            
law (Component 6). The DNSH assessment has confirmed that their environmental impacts are 
rather  negligible,  ensuring  that  they  do  no  significant  harm  to  any  of  the  six  environmental 
objectives.  

Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  no  measure  for  the 
implementation of reforms and investments projects included in Latvia’s recovery and resilience 
plan is expected to do a significant harm to environmental objectives within the meaning of Article 
17 of Regulation (EU) No 2020/852 (the principle of ‘do no significant harm’). This would warrant 
a rating of A under the assessment criterion 2.4 of Annex V to the RRF Regulation. 

4.5. Green transition  

Latvia’s RRP correctly follows the methodology for climate tracking set out in Annex VI to the 
RRF  Regulation  by  identifying  intervention  fields  and  corresponding  coefficients  for  the 
calculation of support to the climate objectives, for each measure. It should be noted that: 

• 
the measures of the RRP often consist of several sub-measures – for these measures, the 
RRP indicates an intervention field for each sub-measure and computes the climate contribution at 
sub-measure level.  

• 
where  relevant,  milestones  and  targets  include  specifications  that  ensure  that  the 
requirements  of  an  intervention  field  are  met.  For  instance,  where  intervention  field  025bis  – 
“Energy efficiency renovation of existing housing stock, demonstration projects  and supporting 
measures compliant with energy efficiency criteria” is used, a milestone/target specifies that the 
measure must achieve the conditions of the intervention field, i.e. on average, at least a medium-
depth level renovation as defined in Commission Recommendation on Building Renovation (EU) 
2019/786. 

the choice of intervention fields for the climate transition is well justified and reflects the 

• 
nature, focus, objective or expected outcome of the investments.  

the RRP proposes to increase the climate coefficients for measure 1.3.1.1i. Strengthening 
• 
the capacity of the rescue services. This measure relates to the building of new energy-efficient 
fire rescue centres which will be part of an overall reform of the fire and civil recue service of 
Latvia. According to Annex VI of the RRF Regulation, building a new energy efficient building 
calls for tag 025ter Construction of new energy efficient buildings and a 40% climate contribution. 
However, to take account of the accompanying reform measures that credibly increase their impact 
on the climate objectives the coefficients for support to the climate objectives has been increased 
to  100  %  for  this  investment.  As  explained  in  the  recovery  and  resilience  plan,  the  reform 
accompanying the measure will contribute to the objective of climate mitigation by decreasing the 
response time for intervention by fire rescue services: the sites and location of fire rescue centres 
will be updated to new needs and they will be integrated with other services of the Ministry of 
Interior to improve their coordination. The reform will also directly contribute to fire prevention 
and  therefore  to  the  climate  adaptation  objective  thanks  notably  to  the  development  and 
implementation of warning, monitoring and analytical tools for risk analysis and a public awareness 
campaign. This impact of the reform on the climate objectives is also covered by a target: a decrease 
of  33%  of  the  surface  of  wildfires  is  expected  from  2020  to  2025  (on  a  multiannual  average).  
Moreover, the increase resulting from the 100% tag does not exceed a total amount of 3 % of the 
allocation of the recovery and resilience plan for individual investments. 

46 

 
 
Measures supporting climate change objectives in Latvia’s recovery and resilience plan account 
for EUR 683.894.500 which represents 37.6% of the plan’s total allocation. Of the 6 components 
in  the  plan,  2  components  include  expenditure  that  contribute  to  the  climate  objectives  (almost 
exclusively Component 1 Climate change and sustainable development and with one measure from 
Component 3). 

With  a  total  of  EUR  311 128  000,  the  largest  climate  contribution  of  the  recovery  and 
resilience plan results from sub-component 1.2 devoted to energy efficiency intervention. This 
subcomponent  notably  includes  energy  efficiency  measures  for  multi-apartment  buildings 
(1.2.1.1), businesses (1.2.1.2), municipal buildings and infrastructure (1.2.1.3) as well as public 
sector buildings, including historical buildings (1.2.1.4) with business being the largest recipient 
of  funds.  These  investment  measures  benefit  from  a  100%  climate  tag  as  they  will  respect  the 
energy efficiency criteria of at least 30% primary energy savings and this level is guaranteed in 
their  respective  milestones  and  target.  Lastly,  this  subcomponent  is  completed  by  a  measure 
supporting  the  modernisation  of  electricity  transmission  and  distribution  networks  and  the 
deployment of renewable energy (1.2.1.5) which also benefits from a 100% climate tag mainly 
under 033 Smart energy systems (including smart grids and ICT systems) and associated storage 
facilities. Support to clean mobility will be complemented in component 3 by measure 3.1.1.6.i. of 
a  more  limited  size  dedicated  to  the  purchase  of zero-emission vehicles for the performance of 
municipal functions and services. 

Sustainable  transport  measures  also  provide  a  significant  contribution  to  the  climate 
objectives.  As  part  of  the  green  transition  and  to  reduce  greenhouse  gases  emissions  in  Riga, 
measure  1.1.1  Riga    Transport  reform  proposes  an  investment  programme  to  decarbonise  and 
improve  public  transport.  The  plan  will  focus  on  railway  solutions  (electrification  of  81  km  of 
railway) and zero-emission electro-mobility (acquisition of 4 low-floor trams, 17 electric buses and 
7 electric bus charging stations, construction of a cycle roads). These different investments benefit 
from a full 100% climate tag as they represent clean urban rolling stock or infrastructure. With a 
total  of  EUR  295,413  million,  this  subcomponent  represents  the  second  biggest  climate 
contribution to the 37% target.  

Measures  for  the  adaptation  to  climate  change  and  prevention  (subcomponent  1.3)  also 
support the Latvian plan’s climate ambition. This subcomponent consists of the construction of 
fire rescue centres as newly energy efficient buildings as part of an overall reform (see explanation 
above 3.1.1i. Strengthening the capacity of the rescue services). It also includes flood prevention 
measures including the rehabilitation of polder pumping stations, the restoration of protective dikes 
and of regulated sections of rivers. This fully contributes to the objective of climate adaptation. 
Altogether, this subcomponent accounts for EUR 69 587 000 of the plan’s climate contribution.  

The  measures  in  Latvia’s  recovery  and  resilience  plan  effectively  contribute  to  the  green 
transition, and to addressing the challenges resulting therefrom. The plan supports Latvia’s 
decarbonisation and energy transition objectives, as set out in the National Energy and Climate 
Plan (NECP). In the NECP, Latvia commits to reducing GHG emissions (-6% compared to 2005), 
increasing energy efficiency (reduction in primary energy consumption down to 4.1 Mtoe in 2030), 
and increasing renewable energy (50% renewables in gross final energy consumption). Together 
with the NECP, the Strategy of Latvia for the Achievement of Climate Neutrality (SLACN) by 
2050 ensures coherence between the energy and climate areas, as well as the interconnection with 
the  green  and  energy  transition  dimension  of  the  investments  envisaged  in  the  recovery  and 
resilience plan. Latvia has systematically indicated through its do-no-significant-harm assessment 
that none of the proposed measures generate harm to the protection and restoration of biodiversity 

47 

 
 
and ecosystems  in some cases with milestones but has not included any biodiversity measure as 
such,  going  beyond  climate  contribution,  and  the  plan  has  not   demonstrated   in  detail  how  the 
measures in the plan contribute to biodiversity specifically, beyond the contribution to biodiversity 
brought by climate-related measures. 

Various components of the recovery and resilience plan contribute to the commitments made 
in the NECP and will have a lasting impact:  

-  Regarding  greenhouse  gases  emissions,  Latvia  underlines  in  its  Plan  its  contribution  to 
reaching the 2030 and 2050 targets and considers that the measures implemented under the 
plan could lead to a reduction of 36 241 t/CO2 equivalent per year in total. It 
for 
instance expected that measure 1.2.1.2 Increasing energy efficiency in business will lead to 
GHG emission savings of 13 115 Co2 equivalent in t/year.  

is 

-  Regarding primary energy consumption, Latvian estimates consider that a reduction of 49 
814 MWh/year could be achieved. Subcomponent 2 which is almost entirely devoted to 
energy efficiency renovation projects will contribute to the energy efficiency target of the 
NECP. Investments improving the energy efficiency of multi-apartment buildings (1.2.1.1),  
of  municipal  buildings  and  infrastructure  buildings  (1.2.1.3)  and  public  sector  buildings 
(1.2.1.4)  are  respectively  expected  to  lower  primary  energy  consumption  by  14  423 
MWh/year, 4 544 MWh/year and 4 456 MWh/year according to the Plan. 

These measures are expected to contribute to the green transition to some limited extent to 
biodiversity. The plan contains no measures having biodiversity as their objective. However, some 
of  the  measures  for  climate  mitigation  may  indirectly  benefit  biodiversity,  given  that  climate 
change is one of the main threats to biodiversity. For example, the plan argues that the measures to 
be implemented by the Plan in greening the transport sector and improving energy efficiency are 
also expected to have an indirect positive impact on biodiversity. The recovery and resilience plan 
therefore contributes to helping Latvia meet the national energy and climate ambition set out in the 
NECP  and   Strategy of Latvia for the Achievement of Climate Neutrality by 2050 and thus in 
achieving climate neutrality in 2050. 

Taking into consideration the assessment of all the measures envisaged, the recovery and resilience 
plan is expected, to a large extent, to make a significant contribution to the green transition or to 
address  the  challenges  resulting  from  it  and  ensures  that  at  least  37%  of  its  total  allocation 
contribute to the climate target. This would warrant a rating of A under criterion 2.5 of Annex V 
to the RRF Regulation. 

4.6. Digital transition  

Digital tagging 

With all measures in the digital component digitally tagged as well as adding measures in the Rule 
of Law and Inequality components, the Plan reaches a 21% digital target or EUR 383.8 million. 
The  main  investment  measures  contributing  to  reaching  digital  target  are  upgrading  public  IT 
platforms  and  infrastructure  (EUR  129  million),  digitization  of  businesses  (EUR  125  million), 
reskilling and upskilling, including basic and advanced digital skills (EUR 95 million). 

48 

 
 
 
 
 
Digital transition  

The digital component covers all the aspects of the digital transformation - public and private 
sector, skills and connectivity. Measures are to a large extent in line with the identified needs, in 
particular,  digital  skills  at  all  levels  and  support  to  the  private  sector  for  the  uptake  of  digital 
technologies. The digital transition measures focus on creating medium and long-term changes to 
improve the competitiveness of the Latvian economy.  

The digital component structurally addresses a number of digital transition challenges that 
are important for Latvia. The plan makes a significant contribution to the development of basic 
digital skills of citizens and entrepreneurs; supports equal provision of society for access to digital 
technologies  and  communications;  contributes 
to  effective  public  ICT  governance  by 
implementing administrative centralisation reforms; provides a systemic solution for sharing state 
and  commercial  sector  data  and  modernises  state  and  local  government  processes  and  services 
essential to society.  

The  digital  component  consists  of  25  measures  in  four  areas  to  support  the  digital 
transformation.  It  addresses  boosting  public  administration’s  digital  capacities,  investing  in 
digital  services  and  infrastructure,  uptake  of  digital  solutions  and  technologies  for  the  private 
sector, focusing on basic and advanced digital skills, as well as improving connectivity via 5G and 
last  mile  connections  in  rural  areas.  The  measures  aim  to  develop  the  necessary  infrastructure, 
capacities  and  skills,  improve  efficiency,  digital  processes  and  data  management  in  public 
administration,  provide  support  to  the  digital  transformation  of  businesses  and  improve  the 
connectivity.  

The reforms and investments in public administration will focus on digital processes and data 
management  in  public  administration  with  national  ICT  solutions,  e-services  and 
applications  to  produce  a  more  efficient  public  administration  closer  to  citizens  and 
businesses. The federated national cloud will allow the development of the national economy data 
and digital services economy. The measures will ensure the data availability, sharing and analytics. 
Specific reforms aim at interoperability of the public administration and once only principle and 
therefore  at  least  indirectly  contributing  to  the  entry  into  force  of  the  Single  Digital  Gateway 
Regulation11.  The  reforms  and  investments  consist  of  building  the  common  ICT  public 
administration  conceptual  architecture  for  centralised  as  well  as 
individualised  public 
administration IT systems and solutions. The implementation of the reforms will be coordinated 
and  managed  by  the  national  ICT  governance  organisation.  Measures  reducing  burden  on 
enterprises and citizens, and those aiming to provide support for the adaptation to use of advanced 
technologies are also contributing to the digital transition. 

Measures addressed at digital transformation of businesses will enhance capacities through 
a  broad  spectrum  of  actions.  The  reforms  and  investments  include  the  establishment  of  a 
European  Digital  Innovation  Hub  (EDIC),  a  supporting  digital  transition  as  a  one-stop-shop, 
establishing a digital maturity test system; ensuring the regional contact points provide new digital 
transition support functions. The investments include grant schemes and financial instruments to 
support the digital transformation of businesses; including digitalisation of businesses processes, 
research and innovation actions to develop new high-tech digital products and services, training 
actions,  as  well  as  industry  4.0  solutions  related  to  advanced  technologies  such  as  Internet  of 

11 Regulation (EU) 2018/1724 of the European Parliament and of the Council of 2 October 2018 establishing a single 
digital gateway to provide access to information, to procedures and to assistance and problem-solving services.  

49 

 
 
                                                            
Things,  Artificial  Intelligence,  Machine  Learning,  Blockchain,  big  data,  High  Performance 
Computing, Cloud computing, and Virtual and Augmented Reality.  

Latvia aims to increase the share of people aged 16-74 with at least basic skills to 54% in 2026 
(43%  in  2020).  Digital  upskilling  addresses  improving  basic  and  advanced  digital  skills  for 
citizens, enterprises and public administration with a wide range of digital skills measures.  The 
skills reforms and investments will be implemented by adopting and implementing the Education 
Development Guidelines; setting responsibilities of enterprises in education of their employees and 
creation of wider opportunities and rights for employees to participate in education; establishing 
framework  and  piloting  individual  learning  accounts;  and  establishing  three  Skills  funds.  In 
addition,  “computer  libraries”  will  be  created  in  schools  to  help  to  close  the  digital  divide,  in 
particular, in relation to socially vulnerable schoolchildren. Number of training programmes are 
envisaged for basic digital skills for youth, private sector and public administration specialists. 

Connectivity  will  be  improved  by  providing  backhaul  for  5G  corridors  and  last  mile 
connections. The connectivity measures are aimed at ensuring 100% of fibre backhaul along the 
Via  Baltica  5G  corridor  as  well  as  last  mile  connectivity  in  rural  areas,  aligned  with  private 
investment and Cohesion policy funds. 

Outside the digital component there are 5 measures contributing to the digital transition in 
the  rule  of  law  and  reduction  of  inequality  components.  These  other  measures  address 
participation in the labour market of unemployed, jobseekers and people at risk of unemployment 
(3.1.2.5.i.) and modernizing the technical and analytical capacities for the implementation of rule 
of law enforcement, including using AI solutions (6.1.1.1.i., 6.1.1.2.i., 6.1.1.3i., 6.1.2.1.i.).  

Significant investments are foreseen in digital transition to address CSRs. The main reform 
measures in the plan, covering a subset of the CSRs refer to introduction of sectoral and individual 
skills  accounts  and  improving  digital  sector  governance.  Investment  CSRs  are  addressed  by 
investments in public sector IT systems, basic and advanced digital skills, both in public and private 
sectors and in businesses digital adaptation, as well as by improving last mile and 5G connectivity.  

Investments  in  digital  transition  and  skills  create  synergies  and  complementarities  with 
planned Cohesion Policy investments and other European level initiatives12. The Plan includes 
measures with a higher maturity, taking into account the relatively shortest eligibility period of the 
plan  by  end  2026  compared  to  Cohesion  policy  investments.  Demarcation  between  different 
projects or their implementation stages are set out. The plan is aligned with the European Digital 
Strategy, focused on improving competitiveness and boosting digitization, including taking part in 
Multi Country Projects and planned IPCEIs: Via Baltica 5G - corridor, network of European Digital 
Innovation  Hubs,  European  Common  Data  Infrastructure  and  Service  (trough    the  set-up  of  a 
planned IPCEI on Next Generation Cloud), Connected Public Administration, Genome Europe, 
Baltic  States’  X-ray  image  exchange  system  (Baxe),  microprocessors  and  semiconductor 
technologies. The plan includes  measures that are expected to be co-financed under the Digital 
Europe  Programme,  Connecting  Europe  Facility,  and  Cohesion  policy  funds.  This  concerns 
measures  aimed  at  establishing  the  Latvian  Federal  Cloud  and  linking  the  development  of  the 
National Data Sharing Platform to the Single European Data Infrastructure and Service, as well as 
the United Public Administration Priorities. 

12 Such as the communication ‘Updating the 2020 New Industrial Strategy: Building a stronger Single Market for 
Europe’s recovery’(COM(2021) 350 final) and its accompanying staff working documents 

50 

 
 
                                                            
Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  the  Recovery  and 
Resilience  plan  is  expected,  to  a  large  extent,  to  make  a  significant  contribution  to  the  digital 
transition or to address the challenges resulting from it and ensures that at least 20% of its total 
allocation contribute to support digital objectives. This would warrant a rating of A under criterion 
2.6 of Annex V to the RRF Regulation. 

4.7. Lasting impact of the plan 

The  implementation  of  envisaged  reforms  and  investments  is  expected  to  bring  structural 
changes in the economy. If successfully implemented, the measures shall improve Latvia’s growth 
potential,  and  economic  and  social  resilience  in  the  medium  term,  and  facilitate  the  green  and 
digital transitions. In particular, the RRP is intended to improve labour supply, with such measures 
as upskilling and reskilling, and help private firms to become greener, digital and more innovative, 
with energy efficiency, digital audit and new R&D support measures.  

In addition, the stakeholder consultation process was overall adequate, which can enhance 
the ownership of stakeholders, in turn supporting the lasting impact of the measures. Overall, 
the RRP has had an adequate stakeholder consultation process, especially in the final months/weeks 
ahead of the submission. The government consulted various stakeholders, including social partners. 
Several suggestions have been presented during a live-streamed Cabinet meeting and some were 
accepted, and included in the RRP. 

However,  the  sustainability  of  the  financing  of  some  measures  once  the  RRF  ends  is  not 
ensured. The lack of sustainable finance in some sectors (e.g. on healthcare) risks weakening the 
impact of proposed measures in the long run, in particular once the RRF funding comes to an end. 

The  macroeconomic  simulation  (as  shown  in  the  macroeconomic  simulation  in  Part  IV) 
shows little long-lasting effects from infrastructure and human capital investment, partly due 
to  a  restricted  scope  considered  in  the  model.  On  the  whole,  the  estimated  macroeconomic 
impact over 2021-29 appears cautious, given the size of the investment 6.0% of 2019 GDP over 
six  years,  i.e.  approximatively  1%  of  GDP  per  year.  These  low  estimates  are  partly  due  to  the 
restricted scope of the model used for assessment, which considers investment only (and does not 
factor in the effects of reforms), as well as to assumptions, notably regarding the crowding-out 
effects of RRF funds on private investment, or the replacement of domestic investments by EU 
funds. 

Structural change in administration and institutions, as well as in policies 

Structural changes on administration and relevant institutions, as well as in policies, can be 
expected  from  the  implementation  of  the  RRP.  However,  for  some  measures  such  changes 
would appear limited due to the lack of a comprehensive set of measures, or because their lasting 
feature is not fully ensured. 

The reform of the governance and financing of the higher education institutions is one of the 
most ambitious reform proposals of the plan (under component 5 ‘Productivity). If successful 
in  achieving  its  goals,  it  would  have  a  profound,  long-lasting  impact  on  the  quality  of  higher 
education and research in Latvia. It would lead to a structural change to both the institutions of 
higher education and the higher education policy, and increase quality of human capital in R&I. 
This would better reward academic performance and focus the scarce resources to achieve better 
quality  (as  opposed  to  quantity).  A  number  of  other  proposals  under  component  5,  involving 
important, but smaller steps in their respective areas – tax administration, judicial system, public 

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administration, and public procurement – would lead to long-term changes both to administrations 
and policy implementation. 

Other measures shall lead, if successfully implemented, to some lasting structural changes in 
administration and institutions, as well as in policies. 

In principle, measures under component 2 ‘digital transition’ shall have lasting positive impact on 
public administration efficiency and policy making (e.g. Reform 2.1.1 Modernisation of national 
processes  and  services  and  digital  transformation  and  Investment  2.1.1.1i:  Modernisation  of 
government and digital transformation of services, including business environment). There is an 
institutional  commitment  to  establish  legal  and  institutional  frameworks  tackling  structural 
problems, especially in public services and digital skills, including training for students, jobseekers, 
civil  servants  and  workforce  (e.g.  Measure  2.3.r.  Digital  skills  for  the  digital  transformation  of 
society and government). This shall contribute to lasting structural changes. However, securing the 
improvements of the digital sector governance remains a pending issue. 

The reorganisation of municipalities, implying a regrouping and reduction in number, (measure 
3.1.1 Administrative territorial reform under component 3 ‘Reduction of inequalities’), shall also 
help making public services more cost-efficient and of better quality. The investments in support 
of  the  administrative  territorial  reform  will  also  bring  about  structural  changes  both  in  public 
administration  and  policy  making,  by  increasing  the  municipal  capacities  and  contributing  to 
improved policy-making. Moreover, Reform 3.1.2.r. Access to social and employment services in 
support of the minimum income in component 3 will contribute to improving the social safety net, 
reduce inequality and foster social inclusion in Latvia.   

Under component 6 ‘rule of law’, measures on shadow economy (6.1.), modernisation of public 
administration  (6.3),  centralisation  and  professionalisation  strategy  with  regard  to  procurement 
(6.4.3.r.) and strengthening NGOs (6.3.1.4.) are expected to contribute to long-term changes and 
improved  capacities  of  public  administration  and  policy  making.  In  details,  the  measure  6.1.1. 
Strengthening  analytics  and  developing  data  management  in  the  field  of  tax  administration  and 
customs are expected to establish a system of compliance risk analysis in the areas of taxation, 
customs,  excise  goods,  anti-money  laundering  and  crime  reduction;  the  reform  on  modernising 
public  administration  (6.3)  is  expected  to  contribute  to  an  efficient  public  administration  that 
delivers  better  quality  services,  designs  and  implements  better  policies,  and  attracts  and  retains 
competitive  and  professional  staff;  the  NGO  measure  (6.3.1.4.)  is  expected  to  improve 
representation  of  socially  vulnerable  groups  in  dialogue  with  public  administration;  and  the 
measure 6.4.3.r. Development and implementation of a professionalisation strategy is expected to 
lead to the centralisation of procurements in specific areas, thereby ensuring cost efficiency and 
enhancing  the  professionalisation  of  contracting  authorities.  Investments  in  customs  control 
capacities (6.1.2.1.i, 6.1.2.2.i and 6.1.2.3.i) are expected to contribute to reducing the risk of non-
compliant and/or illegal goods being placed on the internal market also ensuring a level playing 
field for businesses and adequate protection of consumers. 

However, the lasting effects of some measures may be somewhat narrowed, due to the absence 
of  complementary  policies,  or  the  lack  of  a  strategy  for  ensuring  long-term  sustainable 
financing. 

For  instance,  under  component  1  ‘green  transition’,  whereas  the  materialisation  of  the  public 
transport plan and the increased importance of rail transport, if successful, could be considered as 
a  policy  shift,  the  current  planning  of  public  transport  offer  in  Riga  region  is  scattered  and  not 
interlinked to any transport mode. Whereas the measures aiming at energy efficiency renovation 
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of  buildings  will  result  in  long  term  impacts  as  saved  energy,  reduced  GHG  emissions  and 
improved quality of air, opportunities of undertaking necessary reforms and enabling conditions to 
attract  private  investment  for  renovations  and  use  of  ESCOs  (energy  performance  contracting 
especially in public and tertiary buildings) are not explored. Moreover, while potentially addressed 
by  other  means,  a  number  of  challenges  and  opportunities  resulting  from  the  green  transition, 
namely circular economy, sustainable innovation (business models, products and services), green 
skills, have been left outside the plan. 

The  component  3  ‘reduction  of  inequalities’  proposes  a  number  of  measures  aiming  to  address 
several inequality challenges in Latvia. The component aims to reduce inequality by creating more 
jobs in the regions, improving regional connectivity and access to quality services, providing more 
affordable housing, improving the school infrastructure, helping to up-skill and re-skill workers 
and  unemployed,  strengthening  the  social  safety  net,  improving  accessibility  to  buildings  for 
persons with disabilities, and new long-term care facilities for the elderly. This constitutes a good 
basis for taking further measures necessary to strengthen social resilience and adapt dwellings for 
persons with limited mobility. 

Regarding  measures  under  component  4  ‘Health’,  whereas  the  resilience,  accessibility  and 
effectiveness  of  Latvia’s  health  system  are  expected  to  improve  in  several  years,  the  long-term 
effect is not ensured and shall depend on the sustainability of financing. The measures shall notably 
contribute to improved governance of the health system, including reinforcing the capacities of the 
Ministry of Health. The sector will also benefit from the research, modelling and training measures. 
The digital strategy (elaborated in digital component) and modernisation of the e-health system 
will  improve  efficiencies  in  the  health  sector.  However,  for  the  impact  of  the  measures  to  be 
sustainable and lasting, complementary and sustainable financing in Latvia’s health system needs 
to be ensured in the long-run, and the shortages in the healthcare workforce need to be addressed. 
In absence of a sustainable approach to increase the level of financial and human resources to the 
system, the impact is likely to be rather short-term. 

Under component 4, an example of measures expected to bring about a structural change in the 
administration  or  in  relevant  institutions  is  Reform:  4.3.1:  Sustainability  of  health  care, 
strengthening governance, efficient use of health resources, increase of total public budget in the 
health sector. The objectives of the measure are to improve the efficiency of the provision of state-
funded health services by ensuring the availability of services and establishing a systemic change 
mechanism for state-paid services. 

Another example of measures expected to bring about a structural change in relevant policies is 
Reform 4.2.1:  Provision of human resources and upskilling. The reform aims at preparing a health 
workforce strategy, which will encompass health workforce planning, including aspects around the 
development of skills and competences of medical practitioners. A further example is reform 4.1.1: 
Sustainability and resilience of a human-centred, comprehensive, integrated healthcare system. The 
reform aims to develop recommendations for integrated care and epidemiological safety, as well 
as  a  health  infrastructure  investment  strategy.  These  will  link  to  investments  in  hospital 
infrastructure under investment  4.1.1.2.i.: Support for strengthening the health infrastructure of 
university and regional hospitals in order to provide a comprehensive sustainable integrated health 
service, reduce the spread of infectious diseases, ensure epidemiological requirements and under 
investment 4.1.1.3i.: Investments in infrastructure for secondary outpatient service providers. 

Taking  into  consideration  all  reforms  and  investments  envisaged  by  Latvia  in  its  recovery  and 
resilience  plan,  their  implementation  is  expected,  to  a  large  extent  to  bring  about  a  structural 

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change  in  the  administration  or  in  relevant  institutions  and  in  relevant  policies  and  to  have  a 
lasting  impact.  This  would  warrant  a  rating  of  A  under  criterion  2.7  of  Annex  V  to  the  RRF 
Regulation. 

4.8. Milestones, targets, monitoring and implementation  

The national institutions involved in the implementation of the plan, monitoring progress and 
reporting  have  clearly  assigned  responsibilities  and  an  adequate  structure  (see  Section  4). 
Latvia envisages to ensure the implementation process of the plan in the framework of the existing 
management and control system for EU Cohesion Policy. The system is complemented to meet the 
conditions and requirements of the RRF framework. Within this system, the implementation of the 
plan will be coordinated by the Ministry of Finance which will also perform the functions of a 
Managing  Authority.  The  functions  performed  by  the  Ministry  of  Finance  as  the  Managing 
Authority will be separated from its other functions, including those of the Audit Authority. The 
Audit Authority, which is independent from the other departments of the Ministry of Finance in its 
planning  and  auditing,  reporting  and  opinion,  develops  an  RRP  audit  strategy  and  prepares  a 
summary  of  the  audits  carried out for submission to the European  Commission of  the payment 
requests.  The  sectoral  ministries  and  the  State  Chancellery  will  perform  the  responsibilities 
assigned to them, mostly related to practical implementation of the plan. 

Institutions involved in the monitoring and implementation of the plan and their functions 
are  clearly  presented  (see  section  4,  figure  14).  The  Managing  Authority  is  involved  in  the 
organisation of the plan and is in charge of the development of the management and control system 
of the plan, coordinating the reporting process during the implementation of the plan (a half-yearly 
report on the compilation and progress of the plan) and other functions. This structure has defined 
responsibilities  enshrined  by  law,  which  ensures  a  priori  a  sound  coordination  and  reporting 
mechanism between this structure and other bodies responsible for implementing the investments 
and reforms under the various components. 

The necessary administrative resources for the management and supervisory functions of the 
plan  will  be  provided  within  the  institution’s  existing  resources,  with  additional  human 
resources if needed. This should ensure the proper implementation process and does not impose 
a  disproportionate  additional  administrative  and  financial  burden  as  the  institutions  involved 
possess the necessary knowledge, experience and skills. However, Latvia’s public administration 
is relatively small, and the necessity to implement both the RRF and Cohesion Policy programmes 
could be an additional burden. The involvement of the authorities in the implementation of the plan 
takes place within the defined framework of their core activities and functions. Latvia envisages 
that  the  financing  of  sectoral  ministries  for  the  implementation  of  the  plan  will  be  allocated  in 
accordance with the relevant national procedures for the financing of the state budget. A separate 
budget programme is provided in the state budget, which ensures the traceability and separability 
of the financial flows. The issue of allocating state budget resources to cover the administrative 
resources expenditure of the plan will be examined by the Cabinet of Ministers in accordance with 
the financial capacity of the state budget. 

The  plan  describes  adequately  the  intended  monitoring  and  reporting  mechanisms.  An 
information system will collect the necessary information to monitor the reforms and investments, 
including milestones, targets and results. The information system will also ensure the availability 
of  information  related  to  the  investments  and  reforms  of  the  RRP,  including  data  on  the  final 
recipients of the measures of the plan. Information related to the implementation and monitoring 
of the plan will be stored in a data management system – the existing EU funds management and 

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control system KPVIS. The KPVIS will be adapted to the requirements of the RRF framework for 
data collection, progress reports and payment requests, including to collect indicators and other 
information necessary to demonstrate and report the achievement of milestones and targets. The 
KPVIS module for the collection, storage and analysis of project data is planned to be implemented 
at the beginning of Q1 2022, which is somewhat late. In case project applications are submitted 
earlier than the creation of the KPVIS module, the Central Finance and Contracts Agency (CFCA) 
will register and store documentation in the existing DocLogix filing system. Information on the 
checks carried out will be collected and entered into the KPVIS after the creation of the KPVIS 
module. The available IT systems that can contribute to the monitoring process will be used during 
the implementation of the plan, including ARACHNE. Arachne will be used for both ex-ante and 
ex-post checks of CFCA and audits carried out by the AA. KPVIS will be used by all institutions 
involved  in  the  implementation  of  the  plan,  including  beneficiaries  and  monitoring  authorities 
between  the  CFCA,  line  ministries  and  the  Audit  Authority  and  others.  In  terms  of  reporting, 
sectoral  ministries  are  to  continuously  manage  and  update  information  in  the  KPVIS  on  the 
progress and results of the plan on the checks carried out, controls, including deficiencies identified 
and all corrective actions taken. Access to all information and data related to the plan in the KPVIS 
will  be  provided  upon  on  request.to  the  European  Commission,  OLAF,  the  European  Court  of 
Auditors, the Office of the Public Prosecutor’s Office of the European Union. In terms of reporting, 
the Ministry of Finance will prepare, coordinate with sectoral ministries and the Central Finance 
and Contracts Agency (CFCA) and submits a six-monthly progress report, including an evidence-
based offer for payment requests, taking into account the information entered by sectoral ministries 
and CFCA.  

The milestones and targets of the Latvian plan constitute broadly an appropriate system for 
monitoring the plan’s implementation. The milestones and targets chosen represent mostly the 
key elements of the measures and as such can be considered relevant for their implementation. The 
verification mechanisms, data collection and responsibilities described by the Latvian authorities 
appear sufficient to justify in an adequate manner the disbursement requests once the milestones 
and  targets  are  completed.  Sectoral  ministries  will  be  responsible  for  achieving  milestones  and 
targets and for collecting traceable and valid data on milestones and targets achieved and, where 
necessary, for ensuring access to or to provide the necessary information. The Latvian Cabinet of 
Ministers  will  be  informed  of  significant  risks,  problems,  including  in  particular  when  the 
milestones and targets set out in the plan are not met. The measures in the plan are to some extent 
fragmented. This results in a high number of milestones and targets which are back-loaded towards 
2026,  especially  in  the  cases  of  infrastructure  investment  and  horizontal  schemes  for  business 
investment. The monitoring indicators are in general sufficiently clear and robust to ensure that 
their completion can be traced and verified. They reflect adequately the overall level of ambition 
of the plan and appear realistic.   

Latvia provided detailed indicators, which it will use to monitor informally the progress of 
the  implementation  of  individual  measures  between  the  disbursement  requests.  These 
indicators are expected to be included in the Operational Agreement and provide an adequate early 
warning  system  to  ensure  that  Latvia  can  take  corrective  actions  in  time  if  necessary  to  avoid 
missing the objective set up in the relevant milestone/target. In addition, milestones and targets 
sufficiently cover sub-investments so that the plan’s measures can be monitored.  

The RRP’s overall political steering will be ensured by the Latvian Cabinet of Ministers. In 
order to ensure the effective implementation of the plan, the Latvian Cabinet of Ministers is to 
establish  effective,  transparent  and  sound  financial  management  supervisory  procedures  for  the 

55 

 
 
implementation and monitoring of the plan. In this context, the Cabinet of Ministers will delegate 
the coordinating and audit functions to the Ministry of Finance. The line ministries and the State 
Chancellery are responsible for the implementation of the components, while the CFCA will ensure 
the verification of the plan.  

Technical cooperation between the relevant national institutions (Ministry  of Finance, the 
CFCA, sectoral ministries, the State Chancellery, Audit authority and other) will be critical 
for  the  plan’s  implementation.  Latvia  developed  an  internal  control  system  for  the  relevant 
institutions  for  preventing  corruption  and  the  risk  of  conflict  of  interest  within  the  institution. 
CFCA  as  a  direct  administrative  body  subordinate  to  the  Minister  of  Finance  and  accredited 
(certificate  of  compliance  with  the  ISO  27001:2013  –  Information  Security  Management  – 
Standard) will monitor progress, including indicators, assessment of risks, state aid monitoring, 
ensure double funding checks, detection of non-compliance and recovery of irregular expenditure, 
as well as compliance with the conditions for support for commercial activity. It will cooperate 
with  other  entities  including  the  Audit  Authority,  which  will  develop  a  plan  audit  strategy  and 
prepare a summary of the audits carried out for submission to the European Commission of the 
plan progress report. These audits will be complemented by an assessment of the existing control 
system in the institutions involved in the implementation of the plan to mitigate the risk of double 
funding, the risk of conflict of interest and the risk of corruption and fraud, as well as an assessment 
of  the  reliability  of  the  data  on  the  results  achieved.  Sectoral  ministries  will  be  responsible  for 
achieving  milestones/objectives,  in  cooperation  with  CFCA  non-compliance  detection  and 
reporting, data input into KPVIS, monitoring progress, ensuring the whole implementation process 
and its compliance with EU and national regulatory requirements, verifying corruption, conflict of 
interest  and  fraud  risk.  The  experience  and  knowledge  of  the  Ministry  of  Finance,  sectoral 
ministries, the CFCA and the Audit Authority, accumulated in the planning, implementation and 
verification of EU funds projects should be sufficient to ensure correct implementation of the plan. 

The  plan  describes  the  institutional  actors  that  are  responsible  for  implementation  the 
individual  reforms  and  investments  at  component  level.  The  various  actors  in  charge  of  the 
measures are clearly indicated in the description of the components of the plan. Sectoral ministries 
are responsible for the implementation of the specific reforms and investments of the Plan. Each 
line ministry is responsible for providing the necessary capacity to implement and monitor the plan. 
The sectoral ministries or actors involved in the execution of each reform and investment will liaise 
with the Ministry of Finance which ensures overall coordination with line ministries and the Central 
Finance and Contracts Agency (CFCA). All institutions involved in the implementation of the plan 
will develop and supplement their internal procedures for the specificity of the plan.  

The arrangements proposed by Latvia in its recovery and resilience plan are expected to be the 
adequate to ensure effective monitoring and implementation of the recovery and resilience plan, 
including the envisaged timetable, milestones and targets, and the related indicators. This would 
warrant a rating of A under the assessment criterion 2.8 of Annex V to the RRF Regulation.  

4.9. Costing  

Latvia has provided individual estimated costs for all investments and three reforms in the 
recovery and resilience plan. The three reforms with associated costs are in the health component 
of  the  plan,  namely  (i)  on  sustainability  and  resilience  of  a  human-centred,  comprehensive, 
integrated healthcare system; (ii) on human resources and upskilling; and (iii) on sustainability of 
health care, strengthening governance, efficient use of health resources, increase of the total public 
budget in the health sector.  

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The cost breakdown is generally detailed and well-substantiated. For almost all cost estimates 
the  assumptions  used  are  well  described  and  can  be  understood.  The  estimates  are  based  on 
comparisons with past investments of similar nature and on market and price analysis. While the 
tables proposed in the standard template were duly completed and presented, Latvia did not provide 
an independent validation for any of the cost estimates proposed.  

The assessment of the cost estimates and inherent supporting documents shows that most of 
the costs are well justified, reasonable and plausible.  

Reasonable costs 

To support the cost estimates, Latvia provided an extensive list of documents to justify and 
explain the amounts proposed and gave explanations on how those amounts were computed. 
For the most part, older projects or comparative cost data for the main cost drivers were presented 
to serve as a benchmark for the cost estimates. While for the most part the calculations were clearly 
spelt out and it is possible to clearly identify the methodology used, for a limited number of sub-
investments  the  information  provided  proved  less  clear.  Nevertheless,  there  is  no  evidence  that 
would allow doubting the costing estimates provided.  

In this context, it is deemed that the reasonability of the cost estimates has been established to a 
medium extent. 

Plausible costs  

The amount of the estimated total costs of the recovery and resilience plan is in line with the 
nature  and  type  of  the  envisaged  reforms  and  investments.  Latvia  provided  an  extensive 
collection of documents to substantiate the cost estimates. However, for several investments, clear 
explanations were missing as to how the past projects presented as the basis for the estimates were 
used  or  adjusted  to  provide  for  the  cost  estimates  presented.  Without  these  explanations,  it  is 
difficult to assess the plausibility of the costing. Only for a very limited number of measures the 
costs were deemed not within the plausible range compared to costs of similar investments.   

Considering the limitations of an ex ante assessment of cost estimates, the amounts proposed 
for financing were deemed appropriate and seen as establishing the plausibility of the cost 
estimates to a medium extent.  

No double EU financing 

The  individual  components  provide  clear  information  about  additional  investments  from 
other EU funds. Projects funded by other EU sources are demarcated in time and scope from the 
projects  in  the  RRP.  Furthermore,  Latvia  has  put  in  place  arrangements  to  avoid  double  EU 
funding. The Central Finance and Contracting Agency (CFCA) will carry out checks and monitor 
double funding. The existing management and control system for the EU funds 2014-2020 also 
provides  for  double-financing  risk  control  matrix,  which  checks  the  absence  of  double  funding 
within the framework of planned investment projects. Based on this information, the responsible 
bodies will effectively plan, control and monitor measures to ascertain that the beneficiaries are 
not implementing similar or identical projects with other financial instruments.  

To note, the 2021-2027 Partnership Agreement is currently under negotiation, and as such a 
completely developed delineation is not possible at this moment. However, the Commission did 
a preliminary check to reduce the risks of double European Union financing, and no evidence of 
clear risks was identified.  

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Commensurate and cost-efficient costs  

The recovery and resilience plan is expected to effectively help address a significant subset of 
challenges identified in the country-specific recommendations (CSRs). Moreover, the recovery 
and resilience plan contains measures to support economic growth and economic cohesion in an 
inclusive manner. The main objectives of the plan are to improve Latvia’s growth potential, job 
creation, and economic, social and institutional resilience that will ultimately reduce the country’s 
vulnerability to shocks. Several of these measures also contribute effectively to the implementation 
of the European Pillar of Social Rights, including through the promotion of policies for children 
and  youth,  and  to  mitigating  the  economic  and  social  impact  of  the  COVID-19  crisis,  thereby 
enhancing the economic, social and territorial cohesion and convergence within the Union. The 
significant  economic  and  social  impact  of  the  plan  in  combination  with  the  positive  cost 
assessment, indicates that the cost is in line with the principle of cost-efficiency. 

The justification Latvia provided on the amount of the estimated total costs of the recovery and 
resilience plan is, to a medium extent reasonable and plausible, in line with the principle of cost-
efficiency and commensurate to the expected national economic and social impact. Latvia provided 
sufficient  information  and  evidence  that  the  amount  of  the  estimated  cost  of  the  reforms  and 
investments of the recovery and resilience plan to be financed under the Facility is not covered by 
existing  or  planned  Union  financing.  This  would  warrant  a  rating  of  B  under  the  assessment 
criterion 2.9 of Annex V to the RRF Regulation. 

4.10. 

Controls and audit  

RRP  Control  and  audit  systems  are  developed  based  on  the  existing  Cohesion  Policy 
structures.  The  implementation  of  the  RRP  will  be  ensured  by  the  sectoral  ministries  in 
cooperation with the Ministry of Finance as the lead ministry, the Central Finance and Contracting 
Agency (CFCA), the Audit Authority and the Procurement Monitoring Bureau. The audit authority, 
an independent and appropriately segregated unit of the Ministry of Finance, performs horizontal 
system  audits,  creates  an  audit  strategy,  and  gives  opinions  about  the  management  and  control 
system  compliance  with  the  requirements  EU  and  national  normative  acts.    It  also  prepares  a 
summary of the audits carried for the RRP progress report and payment requests. CFCA will ensure 
the monitoring process of investment projects with a focus on double funding, state aid checks, as 
well as controls on the detection and prevention of corruption, conflict of interest and fraud. The 
procurement monitoring bureau performs public procurement procedure pre-checks.  

Adequacy of control systems and other relevant arrangements 

The Audit Authority will carry out audits similar to those of the EU funds 2014-2020 and 
2021-2027 periods. These audits will be complemented by an assessment of the existing control 
system in the institutions involved in the implementation of the RRP plan to mitigate the risk of 
double funding, the risk of conflict of interest and the risk of corruption and fraud, as well as an 
assessment  of  the  reliability  of  the  data  on  the  results  achieved.  Where  necessary,  expenditure 
checks and other additional audit tasks may be carried out in accordance with the risk assessment.  

All information related to the implementation and monitoring of the RRP plan will be stored 
in a single IT system. The existing EU funds management and control system KPVIS will be used 
by  all  institutions  involved  in  the  implementation  of  the  RRP  plan,  including  beneficiaries  and 
monitoring authorities such as CFCA, the procurement monitoring bureau, the Ministry of Finance, 

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line ministries and audit authorities. The KPVIS will ensure the necessary audit trail and milestones 
and  targets  reporting  of  the  components  under  RRF.  The  RRF  module  in  KPVIS  will  become 
available by 1st quarter 2022, before the first payment request is submitted to the Commission. 
Until then, the existing documentation tool DocLogix shall be used for storing the RRP related 
documentation. Until the deployment of KPVIS RRF module, a copy of the EU funds module in 
the KPVIS, which provides for a full data storage structure, may also be used. Once the KPVIS 
RRF module is developed, the information dating back to February 2020, including information 
on the checks carried out, shall be migrated to the new module. A dedicated audit report on the 
system is expected to be undertaken. In case that the report identifies any weaknesses, the audit 
report will recommend corrective actions. 

The  process  to  prevent,  detect  and  correct  fraud,  corruption  and  conflict  of  interest  is  in 
place. These controls will be carried out by the Procurement monitoring bureau and CFCA during 
the  implementation  of  investments/projects,  and  by  line  ministries  in  the  implementation  of 
reforms.  In  addition,  the  audit  authority  will  also  look  at  these  areas  when  carrying  out  system 
audits. Fraud, corruption and conflict of interest will be prevented, detected and corrected through 
(1) procurement checks, whereby the most significant procurement requirements with the highest 
risk of detection of derogations related to risks of corruption, conflict of interest or fraud will be 
examined  on  a  sample  basis  in  a  risk-based  approach;  (2)  data  analysis  of  various  information 
systems (Arachne, VID, Lursoft, firm.lv), (3) on-the-spot checks in order to ascertain whether the 
planned investments and objectives are being implemented as foreseen in the project, (4) including 
obligations  and  responsibilities  for  the  implementation  of  the  investment  projects  to  prevent 
conflicts of interest, corruption and fraud; (5) media monitoring, information from third parties and 
in  collaboration  with  law  enforcement  bodies.  A  horizontal  instrument  for  the  whistle-blower 
protection is in place. 

Adequacy of arrangements to avoid double EU funding 

Arrangements to avoid double EU funding are put in place. Latvia indicates funding and, in 
some instances, amounts from other sources, such as REACT-EU, Cohesion Policy, Connecting 
Europe Facility, Digital Europe and others supporting the implementation of certain measures. The 
CFCA will carry out checks and monitoring double funding. The existing management and control 
system for the EU funds 2014-2020 also provides for double-financing risk control matrix, which 
checks the absence of double funding within the framework of planned investment projects. The 
matrix contains the following details: the number and the title of the specific objective, the number 
of the support measure, selection method, responsible ministry, source of funding, description of 
the  specific  objective  and  the  supported  measure,  beneficiaries,  target  group.  Based  on  this 
information,  the  responsible  bodies  can  effectively  plan  control  and  monitoring  measures  to 
ascertain  that  the  beneficiaries  are  not  implementing  similar  or  identical  projects  with  other 
financial instruments.  

Legal empowerment and administrative capacity of control function 

The RRP implementation set up will be based on the existing cohesion policy framework. On 
18August 2020, the Cabinet of Ministers adopted a decision that the implementation process of the 
RRF will be ensured in the framework of the existing management and control system for EU funds 
2014-2020 which complies with internal control environment, risk management, management and 
control and supervision set out in Annex XIII of Regulation No 1303/2013 and is approved by the 
Cabinet of Ministers and accredited by the Commission. Based on this and the RRF Regulation, 
the Cabinet of Ministers regulation for RRF implementation will be adopted by the end of 2021. 

59 

 
 
The  Cabinet  of  Ministers  will  delegate  the  coordinating  and  audit  functions  of  the  Ministry  of 
Finance as the lead ministry, the line ministries and the State Chancellery will be delegated the 
function to be responsible for the implementation of the components, while the CFCA will ensure 
the verification. An update upon the adoption of those acts and relevant obligations is expected to 
be  included  in  the  Financing  Agreement  to  be  concluded  in  accordance  with  Article  23(1)  of 
Regulation (EU) 2021/241. 

The RRP provides sufficient information on the administrative capacity of coordinating and 
implementing  bodies.  The  experience  and  knowledge  of  Ministry  of  Finance,  line  ministries, 
CFCA and Audit Authority, accumulated in the planning, implementation and verification of EU 
funds projects, are sufficient to ensure a correct implementation of the RRP plan. The Ministry of 
Finance, in cooperation with line ministries, carries out an assessment of the administrative burden 
of implementing the RRP and identifies the need for additional time-limited human resources to 
ensure  that  the  administration  and  monitoring  of  the  RRP  are  ensured.  In  addition,  the 
administrative capacity of the institutions in the form of knowledge will be strengthened within the 
framework  of  the  administrative  capacity  road  map  within  the  framework  of  Cohesion  Policy 
implementation  activities carried  out  within the framework  of  the  plan.  The  financial  resources 
required for the implementation of the requirements of the RRF for 2021 will be channeled from 
the State budget resources to the extent necessary, while the financing required for the remaining 
of the implementation period will be examined during the preparation of the draft Law on the State 
Budget for 2022 and the draft law on the medium-term budgetary framework for 2022, 2023 and 
2024.  

The arrangements proposed by Latvia in the recovery and resilience plan to prevent, detect and 
correct corruption, fraud and conflicts of interest when using the funds provided under the Facility, 
including  the  arrangements  aimed  to  avoid  double  funding  from  the  Facility  and  other  Union 
programmes, are assessed to be adequate. This would warrant a rating of A under the assessment 
criterion 2.10 of Annex V to the RRF Regulation. 

4.11. 

Coherence  

The  Latvian  recovery  and  resilience  plan  is  coherent,  with  consistent  reforms  and 
investments, and synergies between the different components. The recovery and resilience plan 
contains measures for the implementation of reforms and public investment projects that represent 
coherent  actions.  The  six  components  structure  the  investments  and  reforms  and  show  their 
thematic  relation  and  interlinkages  well.  Coherence  is  ensured  within  the  components,  with 
investments accompanied with relevant reforms, as well as between the different components in 
the  plan  through  mutually  reinforcing  reforms  and  investments.  However,  the  plan  remains 
stronger on investments than on reforms. 

The RRP builds on the national industrial policy (NIP) 2021-2027. The NIP is based on the 
objectives set in the National Development Plan, the Smart Specialisation Strategy, as well as the 
Resilience Strategy for Latvia, focusing not only on stabilising the economy, but also on reorienting 
the economy and exploiting the growth opportunities created by the crisis. A large share of RRP 
funding (64%) is dedicated to implementing the NIP. In addition, the RRP is coherent with other 
national planning documents, such as the National Energy and Climate plan.  

Mutually-reinforcing measures  

The  reforms  and  investments  in  each  component  included  in  the  plan  are  consistent  and 
mutually reinforcing. Reforms included in the plan enable and underpin the planned investments. 

60 

 
 
No cases have been observed of areas where the measures proposed within any component (be it 
reforms or investments) contradict or undermine each other’s effectiveness.  

Climate  change  and  environmental  sustainability  is  based  on  the  National  Energy  and 
Climate plan (NECP) approved in 2019.  The reforms and investments in this component are 
targeted  to  achieve  the  same  objectives:  (1)  reduce  GHG  emissions  in  the  transport  sector;  (2) 
increase energy efficiency and (3) strengthening adaptation to climate change. The measures are 
coherent in that the general reforms address these objectives, while the individual investments seek 
to  implement  and  support  the  objectives  of  the  reforms.  The  most  significant  investments  are 
planned in sustainable transport infrastructure in Riga and the Pieriga region, promotion of energy 
efficiency  in  the  public  and  private  sectors,  strengthening  crisis  response  capacity,  as  well  as 
adaptation to climate change. The above measures are strategically important elements in Latvia’s 
NECP in order to achieve the 2030 and 2050 climate targets. 

The component 2 on digital transition covers all the aspects of the digital transformation from 
both reform and investment perspective. The proposed measures are consistent with relevant 
national  strategies  and  plans  and  focus  on  digital  processes  and  data  management  in  public 
administration with National ICT solutions, e-services and applications to produce a more efficient 
public  administration  closer  to  citizens  and  businesses.  Particular  emphasis  is  placed  on  the 
importance  of  RRP  investments  for  the  skills  development.  The  reforms  on  adult  learning 
framework are mutually supportive with the investments. The component is also aligned with the 
European  Digital  Strategy,  focused  on  improving  competitiveness  and  boosting  digitisation, 
including taking part on Multi Country Projects and IPCEIs. 

The  component  3  on  the  reduction  of  inequalities  has  two  distinctly  different  elements  – 
support to the administrative territorial reform and social inclusion. As cohesion remains the 
common goal, it does not pose a prohibitive problem. Both parts are built around key reforms – 
administrative territorial reform (retroactive) and minimum income reform that are supported with 
a coherent set of investments.   

The measures in the component 4 on health are coherent, but remain stronger on investment. 
The  health  component  aims  to  improve  the  resilience,  accessibility  and  quality  of  healthcare 
through two reform strands – integrated healthcare and strengthening the health workforce. The 
reforms  will  prepare  recommendations  for  integration  of  care  and  for  meeting  epidemiological 
requirements, and these will guide the investments in hospital infrastructure. Similarly, regarding 
the healthcare workforce, there is a reform measure and an investment measure, linked  to each 
other,  although  the  reform  element  lacks  ambitious  commitments  for  the  implementation.    The 
corresponding  investment  aims  at  supporting  the  education  and  training  of  the  healthcare 
workforce, thus contributing to the implementation of the health workforce planning prepared in 
the context of the reform.    

The  component  5  on  productivity  is  coherent  with  the  overall  objectives  regarding 
productivity. The measures included in the component focus primarily on the efficiency of the 
higher  education  system  by  promoting  the  concentration  of  resources  of  higher  education  and 
scientific institutions, as well as the reform of the innovation management system with the aim of 
increasing  private  sector  investment.  It  contributes  to  the  expected  productivity  impact  and  the 
reform is in line with the overall education policy, R&I policies and intended investments.  

The component 6 on rule of law measures aims to contribute to the implementation of the 
reform of the modernisation of the public administration. The reform on the modernisation of 
the public administration and the reform on public procurement are complementary and coherent. 
61 

 
 
The reforms and investments are expected contribute to the increased transparency, accountability 
and efficiency of the public administration. 

Complementarity of measures  

The recovery and resilience plan includes measures that are complementary to one another. 
The  components  included  in  the  RRP  of  Latvia  form  a  single  framework  for  reforms  and 
investments, the core task of which is to (1) promote productivity, (2) reduce inequalities, as well 
as (3) green transition and (4) digital transition. The six components are mutually reinforcing and 
coherent in their aims. They do not have contradictory aims or possible negative effects on one 
another.  

Complementary  reforms  to  increase  productivity  and  efficiency  are  planned  in  several 
components of the RRP. The main structural reforms and support measures for increasing the 
productivity of the Latvian economy are concentrated in the component on productivity. At the 
same time, as part of the component on green transition, an important role is given to improving 
the  energy  efficiency  of  businesses,  including  investments  to  improve  technological  processes, 
which have a complementary impact on increasing productivity.  

The  digital  transition  component  plays  an  important  horizontal  role  in  Latvia’s  RRP.  It 
provides horizontal support for the implementation of other structural reforms and the achievement 
of the objectives of several national strategies. Given the cross-sectoral nature and benefits of the 
digital skills, the links between the investments, including in other components of the RRP, are 
clear and reinforcing. At the same time, the digital transition component is complementary to a 
number of reforms in other components, such as increasing access to health and education services, 
improving the rule of law and the business environment and modernising the public administration 
and ensuring the quality and accessibility of the services it provides. 

The overall balance of the response is adequate in view of the main challenges, but the plan 
remains  stronger  on  investments  than  on  reforms.  Ensuring  sustainable  economic  growth, 
catching up with the EU average and decarbonising its economy while coping with a decreasing 
population remain Latvia’s main challenges. The reforms and investments in innovation and skills, 
strengthening social inclusion and reducing regional disparities are essential. In this context, the 
key  reform  measures  provide  an  adequate  response.  Significant  investments  are  planned  for 
sustainable transport, energy efficiency and regional development, while the digital infrastructures, 
social inclusion and clean energy receive less funding relative to the size of their challenge.  

In order to promote wider coherence across instruments, notably with the European cohesion policy 
funds, a balanced territorial allocation of resources is encouraged. 

Taking into consideration the qualitative assessment of all components of Latvia’s recovery and 
resilience  plan,  their  individual  weight  (importance,  relevance,  financial  allocation)  and  their 
interactions, the plan contains measures for the implementation of reforms and public investments 
which, to a high extent, represent coherent actions. This would warrant a rating of A under the 
assessment criterion 2.11 of Annex V to the RRF Regulation. 

62 

 
 
 
 
ANNEX: CLIMATE AND DIGITAL CONTRIBUTION OF THE MEASURES OF THE LATVIAN 
RECOVERY AND RESILIENCE PLAN 

Measure/Sub-Measure Name (with ID) 

1.1.1.1.i.1. Competitive rail passenger 
transport in the common public transport 
system of the city of Riga (acquisition of 
electric rolling stock) 
1.1.1.1.i.2. Competitive rail passenger 
transport in the common public transport 
system of the city of Riga (railway 
modernisation -TEN-T) 
1.1.1.1.i.3.  Competitive rail passenger 
transport in the common public transport 
system of the city of Riga (railway 
modernisation) 
1.1.1.2.i.1. Environmental improvements in 
the city of Riga’s public transport system 
(clean urban transport) 
1.1.1.2.i.2. Environmental improvements in 
the city of Riga’s public transport system 
(clean urban transport infrastructure) 
1.1.1.3.i. Complete rolling infrastructure – 
(cycling infrastructure) 
1.2.1.1.i.I. Improving the energy efficiency 
of multi-apartment buildings and transition 
to renewable energy technologies 
1.2.1.2.i. Increasing energy efficiency in 
business, which is planned to be 
implemented nationally in the form of a 
combined financial instrument 
1.2.1.3.i.I. Improving municipal buildings 
and infrastructure by promoting the 
transition to renewable energy technologies 
and improving energy efficiency 
1.2.1.4.i.I. Improving the energy efficiency 
of public sector buildings, including 
historical buildings 
1.2.1.5.i. Modernisation of electricity 
transmission and distribution networks 

Budget 
(EUR) 
74.400.000 

Climate 
Int. Field  Coeff. % 

074 

100% 

Digital 

Int. 
Field 

Coeff. % 

32.450.000 

067 

100% 

40.250.000 

069 bis 

100% 

24.270.000 

n/a13 

100% 

87.285.492 

073 

100% 

34.514.008 

075 

100% 

57.282.000 

025 bis 

100% 

120.586.00
0 

024 ter 

100% 

29.304.000 

026 bis 

100% 

23.956.000 

026 bis 

100% 

80.000.000 

033 

100% 

13 The ‘Methodology for climate tracking’ annexed to the Recovery and Resilience Facility Regulation does not set 
out intervention fields that would allow for climate or environmental tracking of electric vehicles or plug-in hybrid 
vehicles, except for vehicles for urban transport falling under intervention field 074. According to Article 18(4)(e) of 
the Regulation, the methodology should however ‘be used accordingly for measures that cannot be directly assigned 
to an intervention field listed in Annex VI’. In this context, the Commission has applied a 100% climate contribution 
coefficient for zero-emission vehicles of all categories (this includes battery electric and fuel cell/hydrogen-powered 
vehicles). 

63 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
 
1.3.1.1.i.1. Capacity building for rescue 
services, in particular the upgrading of the 
infrastructure and the logistical base of the 
VUGD ( tag increased to 100% - see 
section 4.5) 
1.3.1.2.i. Investments in flood risk 
reduction infrastructure 
2.1.1.1i. Administration modernisation and 
digital transformation of services, including 
business environment 
2.1.2.1i. Centralised governance platforms 
and systems 
2.1.2.2i. National Federal Cloud of Latvia 
2.1.3.1.i. Data availability, sharing and 
analysis 
2.2.1.1i. Support for the establishment of 
Digital Innovation Hubs and Regional 
Contact Points  
2.2.1.2i. Support for the digitisation of 
processes in commercial activities 
2.2.1.3i. Aid for business introduction of 
new products and services 
2.2.1.4i. Financial instruments to facilitate 
the digital transformation of economic 
operators 
2.2.1.5i.Fostering the digital transformation 
of media companies 
2.3.1.1.i. Delivering high-level digital skills 
2.3.1.2.i. Development of key digital skills 
of enterprises 
2.3.1.3.i. Development of a self-
accompanied training approach for ICT 
specialists 
2.3.1.4.i. Development of the approach to 
individual learning accounts  
2.3.2.1 Digital skills for citizens, including 
young people 
2.3.2.2.i. Development of state and local 
government digital transformation skills 
and capabilities 
2.3.2.3i.Closing the digital divide for 
socially vulnerable students and educational 
institutions  
2.4.1.1.i. Construction of the Passive 
Infrastructure on the Via Baltica Corridor 
for 5G coverage 
2.4.1.2i.Broadband or very high capacity 
network “last mile” infrastructure 
development 

36.630.000 

025ter 

100% 

32.967.000 

035 

100% 

24.437.280 

70.177.920 

12.490.800 
21.756.000 

10.000.000 

40.000.000 

24.300.000 

45.143.000 

5.700.000 

17.000.000 
20.000.000 

7.600.000 

14.306.000 

12.632.000 

8.250.000 

15.000.000 

011 

100% 

011 

055 
011 

010 

010 

010 

010 

010 

108 
108 

108 

108 

108 

108 

100% 

100% 
100% 

100% 

100% 

100% 

100% 

100% 

100% 
100% 

100% 

100% 

100% 

100% 

108 

100% 

12.500.000 

054bis 

100% 

4.000.000 

053 

100% 

64 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.1.1.6.i. Purchase of zero-emission 
vehicles for the performance of municipal 
functions and services 
3.1.2.5.i. Participation in the labour market 
of unemployed, job-seekers and people at 
risk of unemployment  
6.1.1.1.i. Modernisation of existing 
analytical solutions 
6.1.1.2.i. Development of new analytical 
systems 
6.1.1.3i. Personnel training to work with an 
analytical platform and consultancy 
6.1.2.1.i. Linking railway x-ray equipment 
to Baxe and use of artificial intelligence for 
rail freight scanning image analysis 

10.000.000 

n/a14 

100% 

28.710.000 

016 

40% 

2.100.000 

1.880.000 

20.000 

3.000.000 

011 

100% 

11 

100% 

108 

100% 

11 

100% 

14 The ‘Methodology for climate tracking’ annexed to the Recovery and Resilience Facility Regulation does not set 
out intervention fields that would allow for climate or environmental tracking of electric vehicles or plug-in hybrid 
vehicles, except for vehicles for urban transport falling under intervention field 074. According to Article 18(4)(e) of 
the Regulation, the methodology should however ‘be used accordingly for measures that cannot be directly assigned 
to an intervention field listed in Annex VI’. In this context, the Commission has applied a 100% climate contribution 
coefficient for zero-emission vehicles of all categories (this includes battery electric and fuel cell/hydrogen-powered 
vehicles). 

65