Latvia to Benefit from European Funding in 2015

Latvia-to-Benefit-from-European-Funding-in-2015At the end of March, Latvia signed an agreement with the European Investment Bank for the allocation of a 200 million euros loan. The funds will be directed towards co-financed projects that would have usually been funded by the European Union. This loan will provide financial assistance to Latvian enterprises.

European investment funds in the Latgale region

In the period of 2007-2013, the European Investment Bank has granted Latvia a similar loan that has enabled Latvenergo to finish a reconstruction project. Based on the previous achievement, the new loan is a guarantee for Latvian state companies to co-finance their in-progress projects with the money that were supposed to come from the European Funds.

Among the investments, the loan will be used for one of the largest projects that belongs to the Latvian Environmental Protection and Regional Development Ministry in the Latgale region. The project would require 52 million euros from the European Regional Development Fund. The project implies investment in new production territories and restoration of deteriorated ones. The same Latgale region is target by the Transport Ministry that wants to improve the business environment in the area, by creating a “business incubator” worth five million euros.

Investors opening companies in Latgale will also benefit from tax deductions. The investment threshold has also been reduced from ten million euros to one million euros. Another project targets the Rezekne special economic zone in the same region.

However, one of the most resilient sectors in the Latvian economy, the real estate market, hasn’t been allocated any funding yet.

The real estate market’s importance in Latvia’s economic development

It is a well-known fact that the Latvian real estate market was and continues to be one of the most developed economic sectors in the country. However, certain Latvian companies are inclined to predict a stagnation of the real estate market in 2015 and 2016. Growth is expected to occur in several segments only, thus forcing real estate companies that previously relied on the Latvian Residence Program to restructure.

The Latvian Finance Ministry estimated the GDP (Gross Domestic Product) outlook for 2015 has been reduced from 2.8% to 2.1% and the inflation has also been reduced from 2.4% to 0.4%. Latvian real estate companies, however, seem to go contrary to the Finance Ministry’s expectations and they are confident about the development of the real estate market.