I thank the Latvian Economists Association for the initiative to organise this conference. I am pleased that today we are gathered in a wider circle - experts, businessmen, opinion leaders and representatives of political parties, particularly those that will form the next coalition. The challenge is to find common ground on what needs to be accomplished in our country in the next four years, and looking even further ahead - the next eight years.
As I have stressed many times, political parties, when forming a new coalition, must first and foremost focus on the substance - on the tasks and reforms that demand implementation over the next four years. Only once this has been agreed upon, attention should turn to finding those most capable of effectively implementing these policies. Henceforth, once there is agreement on the composition of the next coalition, and that agreement has been reached, there must be agreement on the division of responsibilities between the coalition partners. This part of the political process is taking place this week.
The main programme of work will be formulated in the government declaration. It must be specific, so that before the government is formed and approved by Saeima, there is already agreement on the main objectives and priorities.
A common understanding is needed not only among the coalition partners, but also across society, where a socio-political consensus is required with respect to the goals towards which our country will move.
This winter and the years to come will not be "sailing downwind". The geopolitical and economic risks that Russia's war against Ukraine will continue to pose serious challenges.
We will see a slowdown in the global economy, inflation. Latvia will be no exception to these trends. The rapid growth we saw at the beginning of this year will lead us to have around +2-3% GDP growth in 2022. But it is clear that we will slip into a moderate recession next year. The Bank of Latvia's September forecast indicates -0.2% downturn growth. Therefore, it is important that we hear more analysis later today on how to deal with this situation.
I have repeatedly stressed that we are always lagging behind, we are slipping away from our Baltic neighbours. This troubling trend of failing behind is growing year by year. We need to ask: why is that? We seem to be doing everything right, but we are falling behind, and they are ahead!
Across a number of indicators, when compared to the European Union member states, Latvia is firmly in third place from bottom, especially in an pivotal indicator, such as gross domestic product per capita. By contrast, both Estonia and Lithuania have managed to rapidly improve their position in these indicators rapidly over the last decade.
We know our weaknesses. For years, we have turned a blind eye to the risks of energy dependence.
We are also underinvesting in people. Education, technical, professional and digital skills are below the European average.
There is insufficient investment in research and development. Consequently, our productivity remains low.
Public administration is fragmented and bureaucratic, unable to keep pace with the ever-increasing complexity of socio-economic challenges. The list goes on.
Energy independence and security are now a pressing issue. It is therefore commendable that the government has taken important decisions in recent months to strengthen energy security and divest from Russian gas and oil.
We need both gas supplies for this winter and the coming years as well as a roadmap for the transition to renewable energy in line with the European Green Deal.
It is clear that Latvia needs an LNG terminal so that we have this critical infrastructure in case of need. Wind, solar and other alternative energy projects also need to be fast-tracked.
We also need to invest in energy efficiency - we have negligible energy efficiency development when compared to the efforts of Estonians and Lithuanians. They have managed it, but for some reason, we have not been able to do the same.
Therefore, Latvia is still waiting for a clear long-term energy development concept, which we must expect from the next government. The content of this concept will remain subject to discussion and reappraisal.
I would like to point out that it is precisely in the area of energy that we have not had focused political leadership. I am pleased that today a separate session will be devoted to these issues. However, the next government certainly must have a cabinet member specifically responsible for energy.
In light of the problems outlined, our economic model needs to be reviewed. How will we generate and promote growth? How will we raise our competitive advantage? How will we finance the priorities identified and how will they be reflected in the national budget?
In this regard, there is an imperative to point out that we do not have an independent institution that can provide analytical assistance. For example, Finland has a reform institute that helps the country to carry out reforms. Reforming means getting from A to point B, which is a science in itself. We must acknowledge that this science is not very developed in our country - there are capable individual professionals, but in any case it is integral to provide them with institutional support. Let me reiterate – we have think tanks and analysts, but it is not enough on a national scale.
To keep up, we need to be part of the European Green Deal, to leverage the opportunities it offers for our specific needs. Because Latvia has and will soon have access to significant European Union funds, especially under the "Recovery and Resilience Mechanism", which must, of course, be used effectively.
Above all, it must not be the case that eight years from now, in 2030, we will find that we are even further behind our Baltic neighbours than we are today, in 2022. Today we must seize the initiative in creating the future.
This means that serious investment must not be neglected, especially investment in people, knowledge and skills development, as well as in research, innovation, technology and requisite infrastructure. It is clear that human-centred investment must be a priority in our reform efforts.
All these reforms must be included in the new government's declaration. This will now have to be worked on in earnest, as the coalition composition and the main priorities of development have been agreed upon. Now they will have to be included the relevant paragraphs of the government declaration. I will remind you that the previous declaration contained 247 specific points. One part has certainly been fulfilled, one part will obviously have to be carried over to the new declaration and others will have to be added in order to attain the goals discussed.
That is why the declaration must not consist of empty slogans and good intentions. It must be like chain that holds the coalition together, because all three coalition partners seek to implement this declaration. It is up to me to name the Prime Minister-designate, but I first want to see a sufficiently serious draft of the declaration.
Governance, which focuses essentially on the work of the executive power, will play a crucial role in facilitating this process of change. The executive branch, in turn, is composed of two large blocks: the political, democratically legitimate government, which has only approximate fifteen members, and the non-political, professional public administration, made up of several thousand civil servants.
The structure of government and public administration must reflect the current national policy priorities, and be able to adapt quickly and effectively to meet them. We have no shortage of suitable policy documents, but too often good intentions "remain on paper" or get stifled in bureaucracy. We must discuss this matter in more detail in a moment.
On this note, I would like to conclude. I look forward to constructive discussions that will result in concrete proposals for the necessary reforms over the next four years, and with an eye to the next eight years. Thank you!