European Commission and REFOR 3 June 2026, COMMISSION STAFF WORKING DOCUMENT 2026 Country Report – Latvia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Latvia

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This Commission Staff Working Document constitutes the 2026 Country Report for Latvia, prepared under the European Semester framework and accompanying a Council Recommendation on Latvia's economic, social, employment, structural, and budgetary policies pursuant to COM(2026) 214 final. The report assesses Latvia's macroeconomic performance, fiscal sustainability, competitiveness, green transition, social convergence, and institutional framework, identifying persistent structural challenges including low R&D investment, underfunded healthcare and social protection, a large shadow economy, regional disparities—particularly in the eastern border region of Latgale—and insufficient housing availability. The document records Latvia's progress against 2025 country-specific recommendations (CSRs) and sets out further policy guidance across fiscal, labour, innovation, energy, and social domains, noting that defence expenditure is forecast to reach 5.5% of GDP in 2027 following activation of the national escape clause by the Council of the European Union.AI