DEVELOPING LATVIA’S CAPITAL MARKET AND INVESTMENT CULTURE

A well-developed capital market is one of the prerequisites for a diversified financing system, business growth and long-term economic competitiveness. In recent years, the importance of capital markets in European Union policy has grown significantly, with capital markets increasingly linked to financing innovation, raising productivity, strengthening economic resilience and advancing Europe’s strategic autonomy. The original objective of the Capital Markets Union (CMU) — to broaden firms’ access to market-based finance — has in recent years expanded into the concept of the Savings and Investments Union (SIU), centred on the more effective mobilisation of household savings and their channelling into productive investments.

Latvia’s capital market remains one of the smallest in the European Union. In 2025, stock market capitalisation stood at just 0.8% of GDP, compared with 69.9% across the EU, 10.7% in Estonia and 6.2% in Lithuania. Capital market development has been a priority of Latvia’s economic policy for over 30 years, yet the core challenges persist. The greatest obstacle has not been a lack of policy objectives, but their consistent implementation.

Recent years have seen progress. The corporate bond market has developed substantially, an increasing number of companies are using the capital market as a source of financing, and the Baltic bond market as a whole is experiencing the fastest growth in its history. In 2026, the first steps were taken towards the participation of state-owned enterprises in the capital market — AS “LAU Infra grupa” became the first state-owned company to list on the stock exchange. Nevertheless, despite this progress, Latvia’s capital market continues to lag significantly behind the more developed markets in Europe.

The next stage of Latvia’s capital market development requires not only new initiatives but also a broader perspective on capital market policy. In the context of the European Union’s Savings and Investments Union, developing an investment culture is of particular importance for Latvia. Analysis of the factors shaping investment culture, together with survey data on Latvia’s population, shows that this culture is still at an early stage. Further development of investment culture requires a clear objective and supporting instruments tailored to it — instruments that help different population groups begin investing or develop their investment strategies. These instruments must widen access to the capital market for as broad a group of people as possible, while avoiding an overly generic approach that formally suits everyone but in practice reaches no group effectively.

The study draws on analysis of Latvian and international policy documents and statistical data, a population survey (n=1,520) on investment habits and barriers, and semi-structured interviews with representatives of the capital market ecosystem. The study examines four interrelated questions: the contemporary understanding of the scope of capital markets, the evolution of Latvia’s capital market policy (1991–2026), international comparison and monitoring of market development, and the role of private investors and investment culture.

Authors:  Madara Ambrēna, William Schaub, Lelde Kiopa, Andrejs Jakobsons, Kristīne Dambe