Latvia’s Lending Growth Outpaces Eurozone, Fueled by Household and Corporate Demand
Riga, Latvia – As of early 2026, Latvia continues to experience robust lending growth, ranking among the fastest in the Eurozone. This surge in credit activity, observed in both the household and corporate sectors, is occurring at a pace that exceeds the country’s overall economic growth, according to Matīss Mirošnikovs, an economist at Latvijas Banka (the Bank of Latvia).
Credit Expansion Across Sectors
Data from February 2026 reveals a 10.1% year-on-year increase in loans to households, reaching nearly €6.9 billion. Simultaneously, loans issued to non-financial companies rose by 13.2%, totaling €6.8 billion compared to the same period last year. This growth is occurring despite a cautious economic climate influenced by global events, prompting residents to prioritize savings.
Household Lending Driven by Low Rates and Competition
Household lending remains active, supported by historically low interest rates and competitive offerings from Latvian banks. While mortgage refinancing activity has slightly decreased, borrowers continue to seek favorable loan terms. Notably, over-crediting activity remains significantly higher than pre-2025 levels, and fresh home loan issuance has consistently been strong, increasing by 15% compared to February of the previous year.
Corporate Lending: A Mixed Picture
Lending to non-financial companies has shown more volatility. Short-term loans, such as overdrafts, experienced a slight decrease at the beginning of the year. However, longer-term loans continue to grow across various sectors, including industry, energy, services, and increasingly, real estate. Decreasing interest rates over the past year have made borrowing more attractive, with an average of approximately €180 million in new loans issued monthly.
Deposits Remain High Amidst Global Uncertainty
Despite the lending boom, deposit activity remains high, reflecting ongoing global uncertainty and a tendency for residents to prioritize savings. Household deposits increased by 8.6% year-on-year in February, reaching €12.2 billion. Deposits from non-financial companies similarly rose by 8.6%, totaling €8.1 billion. This trend is driven by increased incomes and stabilizing inflation, alongside a general inclination towards precautionary savings.
State Treasury Savings Bonds Gain Popularity
The balance of State Treasury savings bonds continues to grow, reaching almost €400 million in February – an increase of €80 million since mid-2025. The yield on these bonds (approximately 2.3% for 12-month bonds) remains competitive with, and slightly higher than, term deposit rates offered by banks (around 2%).
Credit-to-GDP Ratio and Future Outlook
At the conclude of 2025, the combined credit balance of households and non-financial companies reached 31.9% of Latvia’s GDP, a three-percentage-point increase during the year – one of the fastest increases in the Eurozone. While Latvia’s indicators still lag behind the Eurozone average, the potential for further growth exists. However, Mirošnikovs cautions that geopolitical instability and energy price shocks could introduce corrections and limit favorable credit conditions.
Source: Latvijas Sabiedriskie Mediji (LSM) – Looking at Latvia’s current account deficit
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