Latvia
Current situation
Latvia's drone-triggered crisis ends in a decisive win for Kulbergs' United List; coalition talks now decide
Prepared by Valyzer's AI analyst team · sources cited
Latvia's politics were reshaped in 2026. Evika Siliņa's government fell in May after stray Ukrainian drones, diverted from Russia, hit an empty oil depot at Rēzekne, and Andris Kulbergs of the United List took over. In the 3 October election his list won 41 of 100 seats, up from 15 in 2022, while right-wing populists also gained. The economy is soft: the Commission forecasts 1.4% growth in 2026, and defence near 5% of GDP widens the deficit.
- Watch
Strong mandate, coalition still unformed
The United List won about 35% and 41 seats on 3 October, per KAS; Latvia First took 13.1% and Sovereign Power 11.7%, while Siliņa's New Unity fell to 6.5%. Turnout was about 51%, per AP. A majority needs 51 seats, so Kulbergs must add partners; talks began the day after the vote.
- Headwind
Drone incursions exposed air-defence gaps
Ukrainian drones diverted from Russia struck an empty oil depot in Rēzekne on 7 May; Siliņa said anti-drone systems had not been deployed quickly enough. The defence minister resigned, the Progressives withdrew support and Siliņa quit on 14 May, per Kyiv Post. Ukraine's foreign minister blamed Russian electronic warfare for diverting the drones.
- Watch
Defence near 5% strains the budget
NATO estimates Latvia's 2026 core defence spending at 4.92% of GDP. The Commission projects the deficit widening from 2.5% of GDP in 2025 to 4.3% in 2027 and debt from 46.9% to 53.8%, driven by defence, interest costs, indexed social benefits and weaker revenue after an income tax reform.
- Headwind
Energy shock slows a fragile recovery
After 2.1% growth in 2025, led by a 9.8% rise in investment, the Commission expects growth to slow to 1.4% in 2026 as Middle East-driven energy prices lift inflation to 3.6%. It sees geopolitical uncertainty keeping exports modest and the phase-out of EU recovery funds from 2027 limiting public consumption.
Sources (5)
- Economic forecast for Latvia (Spring 2026) European Commission, DG ECFIN
- Parliamentary elections in Latvia 2026 Konrad-Adenauer-Stiftung
- Pro-Ukraine governing coalition wins 35% in Latvian election Associated Press (via Spectrum News NY1)
- Latvian PM Quits Days After Defense Minister Resigned Over Stray Ukrainian Drones Kyiv Post
- Five NATO members seen to spend over 3.5% of GDP on core defence this year, alliance estimates Al-Monitor (Reuters)
Regional context
Europe faces a second energy shock, sticky inflation and weak growth while competitiveness reforms advance slowly
- Headwind
Energy shock revives inflation and rate hikes
The Commission's Spring 2026 forecast cut EU growth to 1.1% for 2026 and raised inflation to 3.1%, citing the Middle East conflict. The ECB hiked twice in 2026, taking the deposit rate to 2.50% on 10 September; its staff project 3.0% headline inflation this year. The IMF warns gas stocks in parts of Europe are below seasonal norms.
- Headwind
Regulation and the productivity gap with the US
According to the Draghi report (September 2024), around 70% of the EU-US gap in per-capita GDP at PPP is explained by lower EU productivity, and more than 60% of EU companies see regulation as an obstacle to investment. It counts about 100 tech-focused EU laws and estimates extra investment needs of €750-800bn a year.
- Watch
Simplification agenda: delivery still being tested
The Commission says 90% of its Competitiveness Compass flagships draw on Draghi and reported €8.4bn in simplification savings (self-reported, September 2025). In May 2026 the Council and Parliament provisionally agreed to delay AI Act high-risk obligations to December 2027 and August 2028. Measurable effects on investment and innovation are not yet visible in the data.
Latvia vs Europe vs the world
| Indicator | Country | Europe median | World median | Vs Europe |
|---|---|---|---|---|
| GDP growth · 2025 | 2.1 % | 1.8 % | 3.4 % | Better than Europe |
| GDP per capita · 2025 | 26,312 USD | 35,917 USD | 7,865 USD | Worse than Europe |
| R&D spending (share of GDP) · 2023 | 0.8 % | 1.5 % | 0.8 % | Worse than Europe |
| Regulatory quality (World Bank index) · 2025 | 1.02 | 0.85 | -0.09 | Better than Europe |
| Government effectiveness (World Bank index) · 2025 | 0.83 | 1.06 | 0.09 | Worse than Europe |
| Energy import dependency · 2024 | 82 % | 60.8 % | 77.4 % | More exposed |
| Trade openness (share of GDP) · 2025 | 129.7 % | 105.1 % | 79.5 % | More open |
| Exports to China (share of total) · 2024 | 1.4 % | 2.5 % | 3.6 % | Less exposed |
| Renewables in electricity · 2025 | 73.9 % | 48.7 % | 40.3 % | Better than Europe |
| Liberal democracy index (V-Dem) · 2025 | 0.75 | 0.68 | 0.35 | Better than Europe |
Medians use the countries that publish the figure that year.
Structural context
Latvia is a Baltic parliamentary republic with a developed high-income economy and EU, eurozone and NATO participation.
- Politics
- The source describes a unitary parliamentary republic, not a current assessment of government performance.
- Economy
- The collected introduction does not establish current economic conditions.
- Security
- Current security conditions are not established; missing evidence does not imply safety or absence of conflict.
- Foreign relations
- EU, eurozone and NATO membership frame the institutional profile.
Structural context adapted from Wikipedia, CC BY-SA 4.0. Reviewed by Valyzer. source
Key numbers
Conflict0
Macro stress68
External dependency78
Government
- Head of state
- not ingested
- Head of government
- not ingested
Notable relations and tensions
- Schengen Area diplomacy member of
- European Union diplomacy member of
- European Economic Area diplomacy member of
- North Atlantic Treaty Organization diplomacy member of
Recent events
No published events for this country yet.