Maximize your understanding of the country with PESTEL analysis of Latvia, designed to reveal the key drivers of success and failure.
Located in the Baltic region of the Northern Europe, the country Latvia was established in 1918. It is considered a high income country with the dynamic economy and stable political environment. Following Pestle Analysis gives a complete overview of the country’s political, economic, social and environmental situation.
Political Factors
Since the Ukraine crisis, the geopolitical tensions took place with Russia in 2014 but the politics is volatile overall. The recent municipal elections in Latvia in June 2017 show that the overall political situation is quite stable. The country does not have any extremist or populist forces rising like the other European countries. The National Alliance is a nationalist party while the Harmony is a socio Democratic Party representing the ethnic groups and holds the local government in Riga the Capital.
Economic Factors
The Latvia economy is small having a free market where the exports contribute to the one third of the GDP. It is open to the global trade and investment however the corruption is one major challenge that affects the incoming of the foreign direct investment. The long term economic vitality of Latvia is affected by the low birth rate and decrease in population. Its currency has been converted to euro in 2014. The government spending have remained under control due to the fiscal consolidation. The state owned enterprises lack the good governance and efficiency while the capital markets need more development.
Social Factors
The Latvian population was 1969 million in 2016 consisting of various ethnic groups. These include Russians, Belarusians, Ukrainians, Poles and Lithuanians. The official language is Lettish while other languages are also spoken in the country. The country has restored the freedom of religion and worship since 1941. The Catholicism, Lutheranism and orthodoxy are three largest faiths at the moment. There is a legal ban on the employment discrimination based on gender however the women face an unequal treatment in both salary and hiring. The ethnic Russians lack proper travel and residence rights resulting in the serious human rights problems.
Technological Factors
The technology infrastructure is highly developed in Latvia however the country fails badly to integrate the digital technology among other European countries. The progress of country in using the cloud services and social media is relatively slow. The small and medium enterprises lack the knowledge to use the technology in the business and therefore online selling cross the border is low.
Legal Factors
Latvia has introduced the efficient procedures for law enforcement. However the accountability for the corruption still needs to be addressed. The legal infrastructure applies various taxes like income tax, corporate tax, excise tax and the value added tax. The legislations regarding the establishment and operation of enterprise are quite easy. The government is introducing new reforms for the state owned enterprises. The economy is running on the basis of the trade and the trade tariff of 1.5 percent applies on the imports and exports. The market is open to the foreign direct investment however in some sectors it is restricted.
Environmental Factors
The country has various environmental pollution concerns regarding both the air and water. The vehicles’ carbon emission account for the major air pollution. The agricultural chemicals and industry waste is polluting the water facilities due to poor Soviet Union management. The acid rains also occur resulting in destruction of heavy forests. The industrial centers lack the technologies needed to control the waste emission. The government has established various national parks and marine areas to help the natural environment.