As interest rates have declined, economic activity in Latvia has begun to recover. Over the past year, the volume of lending to both households and businesses has increased significantly, and this trend has continued into this year. In September 2025, the total loan portfolio reached EUR 17.8 billion, which was EUR 1.4 billion higher than in the autumn of 2024 . Our bank’s lending indicators also confirm the recovery in business activity: the volume of newly issued loans increased by 37% last year.
However, Latvia still lags behind other European countries in terms of corporate lending. One reason is the relatively low creditworthiness of many companies: only about one-fifth of companies registered in Latvia qualify for borrowing. A positive trend has emerged: Latvian companies have recently been investing more actively in their development after assessing their opportunities and growth potential. The returns on these investments are expected to become visible in the coming years.
Latvian companies borrow less than elsewhere in Europe
When comparing the level of liabilities of Latvian companies with those registered in other EU countries, it is evident that Latvia lags significantly behind both the EU average (where corporate loans account for around 30% of GDP) and the other Baltic States. In Estonia, this figure is 27%, while in Lithuania and Latvia it is around 16% . An assessment of the 2024 financial statements of companies registered in Latvia shows that borrowing levels have not changed significantly in recent years, and many businesses have financed their development using their own funds. This approach may limit growth opportunities, and many strong local companies could potentially expand more rapidly. Approximately EUR 10 billion is currently held in the accounts of all active companies in Latvia, exceeding the level of liabilities (bank borrowings). This indicates good liquidity, but at the same time may point to untapped potential. It should also be noted that the financial health of companies has improved significantly over the past five years.
Only 20% of companies can afford borrowings
Analysis of corporate financial data shows that out of 181,000 registered companies, 110,000 submit annual financial statements, and 9% of them have received bank financing. These are not all the companies that could potentially afford to borrow, which indicates that corporate lending still has significant growth potential. Our assessment suggests that fewer than one-fifth of all active companies would be able to take on credit liabilities (based on 2023 financial statement data).
Why is this the case? First, around 60% are small so-called one-person companies, which may find it difficult to service liabilities or simply do not need loans. Second, around one-third of companies have negative equity, which indicates financial difficulties and usually prevents them from taking on new liabilities. Third, 43% of companies registered in Latvia have negative EBITDA (earnings before interest, taxes, depreciation, and amortisation), which also points to limited profitability and may create difficulties in repaying borrowings.
Small businesses and service sectors record the weakest lending activity. Small businesses often do not require loans, while many service industries do not require large investments. In contrast, a relatively high share of companies with loans can be seen in agriculture (47% of all companies), as well as in the energy and water supply sector and the real estate sector. The lowest lending levels are observed in the ICT, business services, and hospitality sectors.
Developments in the top-performing companies segment
An assessment of the financial performance of companies registered in Latvia shows that the segment of financially strong companies (those able to take on borrowing) includes more than 20,000 businesses, 4,000 more than in 2019. This means that this category of companies is growing and becoming financially stronger. Six years ago, the turnover of the strongest companies totalled EUR 34 billion, whereas by the end of 2024 it had exceeded EUR 53 billion. These companies are more profitable and invest more in development – around 44% of earnings before interest and taxes is reinvested, which is significantly higher than a few years ago. The growth of medium-sized and large companies could be even faster and more ambitious if part of the considerable financial resources currently held in company accounts were invested (among creditworthy companies, this amounts to nearly EUR 7 billion).
Small businesses have long been — and will continue to be — the backbone of the Latvian economy. Nevertheless, faster economic growth largely depends on productivity, which requires investment. Such investments are most often within reach of large companies, many of which have become global success stories that Latvia can rightly be proud of. Currently, around 600 of Latvia’s largest companies, each with an annual turnover exceeding EUR 20 million, generate about half of all business activity in the country (including taxes paid, profitability, turnover, and other indicators). These companies employ around one quarter of the private-sector workforce, and the value added per employee in these firms is twice as high as in small and medium-sized enterprises. This shows that large companies can achieve significantly higher productivity, which is critically important for Latvia’s economic development.
The financial sector is ready and willing to finance growing and ambitious companies on a larger scale. However, sustainable growth is not possible without a well-structured and predictable business environment. Strong and expanding companies form the foundation of Latvia’s economic development, which is why it is important to support initiatives that promote a stable tax policy, legal certainty, investment protection, fair competition, and the reduction of the shadow economy. The broader and more resilient the business base, the greater the chances that the most ambitious companies will grow into internationally competitive industry leadersю
*Eurostat and ECB data on the level of liabilities in the 2nd quarter of 2025.
