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Wednesday 24.01.2018 | Name days: Krišs, Eglons, Ksenija

Bankruptcy rates in Latvia go down; rates in rest of Europe continue to grow

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn comparison with 2012, the number of insolvency processes involving enterprises in Central and Easter Europe increased 5% in 2013. Latvia is the only country in the region where the overall number of bankruptcies had reduced in 2013.

2013 was rather complicated for Central and Eastern Europe. The already weakened economic situation had become even worse. Household consumption continued to reduce under pressure from fiscal measures that were introduced to reduce budget deficit. Loan access was limited and demand for new loans kept increasing. Because of this, enterprises had to reduce sales. Export is the engine that drives GDP growth. This engine was impacted by the recession in Eurozone, as concluded in the latest annual outlook by Coface.

This economic situation was also reflected in the insolvency statistics. In 2013, nearly 70,000 enterprises became insolvent. The number of bankruptcies in all countries of Central and Eastern Europe, except for Hungary, had increased by an average of 9% in 2013. The largest increase was noted in Bulgaria, where 834 had gone bankrupt (+39%) in 2013.

At the same time, the number of insolvency cases in Latvia had reduced by 7.4%m which is the only such case in the region. Financiers link this positive index with GDP growth and the growing consumption in the country. Last year, 818 companies in Latvia became insolvent. Among these companies are Liepājas Metalurgs and Plus Punkts.

According to the outlook of Coface, the average growth rate in countries of Central and Eastern Europe will nearly double this year: from 1.1% in 2013 to 2% in 2014. Baltic States will contribute to this growth: Latvia’s and Lithuania’s growth rates are estimated at 4.2% and 3.4% respectively. Economic growth rates of other countries in the region will also increase in comparison with 2013. The main source of growth will become the growing export volumes and private consumption.

In spite of the fact that analysts predict the recovery of Eastern Europe’s economy, its growth rate will be moderate in 2014 – at 1%. Austria and Germany will be the two main engines of this growth. Coface predicts 1.7% growth in 2014 for both of them. Economic growth of the two countries will be increased by consumption of households, the lowest unemployment levels in the EU, growth of wages and growing external demand for their goods.

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