Riga, June 12 (LETA) - The share of the shadow economy in Latvia decreased by 1.5 percentage points last year compared to the previous year and amounted to 21.4 percent of the gross domestic product (GDP), Arnis Sauka, Director of the Centre for Sustainability Business at the Riga School of Economics, said at a conference on the shadow economy in Latvia on Thursday.

At the same time, in Estonia the share of the shadow economy increased from 17.9 percent of GDP in 2023 to 19.5 percent of GDP in 2024, while in Lithuania the share of the shadow economy decreased by 1.7 percentage points to 24.7 percent of GDP in 2024 compared to 2023.

The results of the Shadow Economy Index survey show that the most important component of the shadow economy in Latvia in 2024 was "envelope wages", which account for 50 percent of the total shadow economy in Latvia.

In turn, another component, "unreported earnings", accounted for 23.6 percent of the total informal economy in Latvia in 2024, while "unreported employees" accounted for 26.4 percent.

The share of average wages that entrepreneurs conceal from the state, or 'envelope wages', decreased by 2.9 percentage points in Latvia in 2024 compared to 2023 and amounted to 20.7 percent.

The unreported income or profits increased by 0.6 percentage points in Latvia in 2024 compared to 2023, from 14.6 percent to 15.2 percent.

In Latvia, the share of uneported employees accounted for 10.9 percent in 2024, showing a decrease of 0.8 percentage points compared to 2023.

The results show that the overall level of bribery, or the percentage of income that companies pay in informal payments to "settle the score", decreased by 0.7 percentage points to 9.3 percent in Latvia in 2024 compared to 2023.

In Latvia, the average percentage of the contract amount used to secure a public contract increased in 2024 compared to 2023, from 7.5 percent to 7.8 percent.

Among sectors, the share of the shadow economy in Latvia was still highest in construction - 33.8 percent, a decrease of 0.4 percentage points compared to 2023. The share of the shadow economy in Latvia's retail sector was 26.2 percent last year, compared to 27 percent in 2023, in the services sector - 23.6 percent (26.4 percent in 2023), in manufacturing - 17.3 percent (18.9 percent in 2023), and in wholesale trade it remained at 13 percent, or the same as in 2023.

On a scale of one to five, Latvia's satisfaction with government tax policy has increased from 2.6 in 2023 to 2.65 in 2024.

Entrepreneurs' satisfaction with the quality of business regulation also increased slightly last year, from 3.04 in 2023 to 3.06 last year on a scale of one to five in Latvia.

Satisfaction with government support for entrepreneurs on a scale of one to five in Latvia decreased to 2.52 in 2024 (2.57 in 2023).

Entrepreneurs' satisfaction with the work of the State Revenue Service on a scale of one to five increased to 3.6 in Latvia last year (3.47 in 2023).

The Riga School of Economics' Shadow Economy Index in the Baltic states is measured annually using surveys of entrepreneurs in the Baltic states. The authors of the study are Sauka and Professor Talis Putnins of the Riga School of Economics.