Latviski English По-русски
Monday 11.12.2017 | Name days: Valdis, Voldemārs, Valdemārs

Economic Diary. Maturity test for Latvia

(No Ratings Yet)

This week’s main event is undoubtedly the approval of the 2013 State Budget project by Saeima MPs. This is the first budget project in the last four years that was compiled without the help of international creditors.

Maturity test

54 MPs of the ruling coalition voted for the approval of the project in the first reading, 37 MPs of the opposition factions Harmony Centre (HC) and Greens’ and Farmers’ Union (GFU) voted against.

“Any departure from fiscal objectives or unjustified manipulations of the Treasury’s revenue projections will be definitely taken in by international markets as the country’s refusal to keep to its obligations and will cause fears regarding our country’s ability to secure financial stability,” – Latvian PM Valdis Dombrovskis said in his speech in the Saeima. Budget-2013 is a “maturity test” for Latvia’s political system: we cannot give in to euphoria and pre-election populism.

It is planned that the treasury’s deficit (calculated using European Commission’s methodology) will be 1.4% from GDP as opposed to 1.9% of GDP in 2011. According to the Finance Ministry’s projection, revenue of the general budget (government and municipalities) will decrease by 1.8% or 5.66 billion LVL in 2013, expenses will decrease by 1.3% or 5.82 billion LVL. Most of the revenue will come from taxes (3.66 billion LVL), the increase of which will be 3%. Grants will make up the bulk of expenses (2.75 billion LVL), as well as social benefits (1.2 billion LVL).

Doing Business in Latvia

According to the latest Doing Business rating of the World Bank, Latvia has dropped to 25th spot from the 21st. After an impressive last year’s leap by ten positions, Latvia dropped by four positions this year and allowed Estonia to take the lead in the Baltics. “Despite separate progress leaps, it can be concluded that we cannot improve the general business environment without sufficient progress in areas we failed to improve anything in the past,” – Economy Minister Daniels says.

Latvia’s weakest points remain the ineffective justice system and construction permit issue – Latvia is only on the 113th spot in the world. According to Doing Business, one needs to go through 21 procedures in Latvia to receive construction permits – an average of 203 days (68 days in Denmark).

Figures presented by the World Bank exceed the terms stated in Latvia’s regulations nearly two ties, said ex-manager of Economy Ministry’s construction policy department and lawyer of the LEXTAL law firm Andris Jekabsons. According to him, some municipalities, mainly in Riga, issue permits longer than it is required by the law: “Businessmen are often requested to provide stamps that are not actually required.”

Moody’s international rating agency also brought disturbing news: the agency kept the negative outlook of the development of the Baltic banking system. Moody’s calls the quality of assets of Baltic credit institutions the main problem. Bank still have impressive portfolios of troublesome loans – this mainly applies to Latvia and Lithuania.

How to convert advantages into money

Nevertheless, Latvia may yet become an international business-centre. Such was the conclusion of the recent “Why Latvia?” conference in Riga.

The topic of turning our country into an international hub for one or another industry is often mentioned on high political levels. There are conditions for this: by far not the highest taxes in Europe, geography, the growing competitiveness of enterprises, and a balanced budget. But, as the experts noted at the conference, in order to convert these advantages into real achievements, Latvia needs to complete a lot of homework. Among the tasks are – improving the justice system, higher and professional education, and simplification of some of the most important procedures for investors.

Zlata Elksnina-Zasirinska, partner of Pricewaterhouse Coopers, presented an interesting example: “Estonians attract business with announcements regarding the fact that enterprises in Estonia do not pay income tax. This is true, though partially: as soon as a company makes the decision to divide its profit, a corporate income tax of 21% immediately kicks in. But they successfully use the traits of their legislation to advertise their business environment.“ According to the specialist, additional opportunities open up for our country to organize capital deposits at the expense of the holding regime, the introduction of which will be carried out next year.

Small yet strong

In conclusion, the total turnover of small and medium size Latvian companies increased by 25% last year. The average turnover of firms reached 312.96 thousand LVL in 2011, as opposed to 251.02 thousand LVL in 2010, according to Lursoft. Representatives of insurance and finances are the most successful: their profit reached 50 thousand LVL on average in the last five years.


Leave a reply

Businessmen: labour force deficit already exists; foreign students should be integrated in labour market

61.2% of businessmen in Latvia already experience problems with finding qualified workers. More than one-fifth of them expect difficulties in the near future. 79.7% of interviewed entrepreneurs said they support the idea of integrating foreign students in Latvia’s labour market, as concluded in data from a survey performed by Latvian Chamber of Commerce and Industry (LCCI), interviewing 225 businessmen.

Commissioner: EC offers support to member states that wish to join Eurozone

European Commission offers additional support to EU member states that wish to join Eurozone, says EC Vice-President for Euro and Social Dialogue Valdis Dombrovskis.

Estonia to continue five school break schedule until 2021

Estonian Ministry of Education and Research has arrived at and published the dates of school breaks for three school years to come and has promised uphold its new system of five breaks instead of the historical schedule of four.

How much does violence against women cost Latvia?

The costs associated with partners’ violence against women in Latvia reach EUR 442 million a year, says Welfare Ministry’s Child and Family Policy Department’s senior expert Viktorija Boļšakova with reference to data from European Institute for Gender Equality (EIGE).

De Facto: company responsible for Rail Baltica project involved in a fraud case

The company owned by the new head of Eiropas Dzelzceļa līnijas Andris Linužs is involved in a criminal process regarding fraud and document forging when receiving state funding for procurement of wind turbines. The committee that picked Linužs for the important post was not aware of this fact, as reported by De Facto programme of LTV.

French salmonella outbreak prompts recall of Lactalis baby milk formula

Baby milk powder producer Lactalis in France has made an international recall of its produce marketed globally under the Milumel, Picot and Celi brands after a salmonella outbreak in France.

Mayor of Riga: New Hanza business quarter to improve city’s development

During his visit to New Hanza business and residence quarter, Chairman of Riga City Council Nils Ušakovs said that every project of this kind improves the quality of life in the city, create new space for apartments and offices, jobs and public-access buildings, as well as pull up the quality of life in surrounding territories.

«European Oscars» dominated by satire drama «The Square»

The awards of the European Film Academy have been given to laureates at a ceremony in Berlin on December 9, where the joint production of Sweden, Germany, France and Denmark «The Square» dominated with six awards.

7.3% less cigarettes exported from Latvia in nine months of 2017

In the first nine months of 2017, roughly 1.9 billion cigarettes were exported from Latvia to other countries, which is 7.3% less when compared with the same period of 2016, according to State Revenue Service’s data compiled on excise goods circulation.

Weather in Latvia to be windy; air temperature to reach +9° C

On Monday, 11 December, air temperature in Latvia will be at -3° C… +2° C. It is expected to be somewhat warmer along the coast, however. Some precipitation will be present, as reported by State Environment, Geology and Meteorology Centre.

Ukrainian police detains Georgian ex-President Saakashvili

Police in Ukraine has over the weekend detained the ex-President of Georgia Mikheil Saakashvili on the same week, when a crowd of his supporters released him from a police vehicle.

Week in Lithuania. Vilnius mayor apologises for poor performance of road services

Vilnius Mayor Remigijus Šimašius has admitted that the road services of the Lithuanian capital city were not efficient enough in their response to the weather conditions, apologising to Vilnius residents for the inconveniences they encountered due to traffic interruptions.

BNN summary of the week: kebab industry’s fears, insiders in anti-corruption bureau, and Latvia’s crumbling roads

BNN offers a summary of this week’s topical news in a variety of categories: Fight; Fear; Opinion; Confusion; Truth.

Farmers Saeima: if Latvia does not ease rules for guest workers, there won’t be any workers

During a meeting of the Food Industry Council, the biggest discussions were raised about the matter regarding the lack of labour force in agriculture and food processing companies. On top of that, farmers are confused over Economy Ministry’s proposed solution, saying that it is too far from reality.

Ex-deputy chief of anti-corruption bureau: I have no doubt the prime minister and president dance to Lembergs’ tune

«For ten year now Aivars Lembergs has been under the ban to perform duties as chairman of Ventspils City Council. And for the same period of time Lembergs and state officials have been ignoring this ban. Environment Protection and Regional Development Minister Kaspars Gerhards, who is responsible for supervising municipalities and is very well-informed of the truce power centre, which, unfortunately, is not Latvian citizens as it is stated in the country’s Constitution, goes to visit Lembergs, not Ventspils. He does that to demonstrate his fealty to the ruler as he would if we lived in the Middle Ages,» says politician from New Conservative Party, councillor of Riga city Council and former deputy chief of Corruption Prevention and Combating Bureau Juta Strīķe.

Average consumer price level up 2.7% in Latvia

During 2017, the average level of consumer prices rose by 2.7 % when compared with last year. Prices of goods grew by 2.7 % and prices of services by 2.9 %.

Updated: MEPs move against allowing phosphates in kebab meat said to endanger massive industry

As the European Parliament plans to vote on vetoing European Commission's proposal to allow phosphates, used to keep seasoned kebab meat moist and aromatic, the industry considers it a threat event to the existence of meat in the popular fast food.

Prime Minister: new step is made to stimulate Latvian-Japanese cooperation

A new step has been made towards stimulating cooperation between Latvia and Japan in political and economic field. Latvia is not large enough for our businesses to focus solely on the domestic market. Our country has a rapidly-growing economy with a free market ready to make major steps towards transnational cooperation, said Prime Minister of Latvia Māris Kučinskis during his visit in Tokyo.

Theatre critic: there is historic importance in people’s trust of television

«Pop-culture’s influence over society should be viewed from two different perspectives. First of all, it is important to consider how society affects popular culture – what we see or hear at least partially reflects the modern society. Secondly, if created products turn out very influential, they inspire people and shift their thought processes or behaviour one way or another. This is because new and exciting products that have never existed until now, products that are considered marginal,» said theatre critic and Assistant Professor of Social Sciences Faculty of the University of Latvia Zane Radzobe.

MEP: Soviet Union’s activities in occupied countries are not discussed openly

Even to this day Soviet Union’s activities in occupied countries are not discussed openly and loudly, said member of the European Parliament Inese Vaidere at the presentation of the English translation of the book ‘Damage Caused to the Baltics by the Soviet Union’ in Brussels.

Expert: data importance will only increase in the digital transformation era

«Technologies are the driving force behind the development of all sectors in the 21st century. They affect our everyday lives and Latvia’s future development. We cannot afford to stop now. We have to continue developing innovations and creativity on all levels,» said Latvian President Raimonds Vējonis during the annual conference organized by Information and Communication Technologies Association.

Estonia in OSCE urges Russia to meet international standards in Ukraine

Estonian Minister of Foreign Affairs, Sven Mikser, draw attention to support of Ukrainian territorial integrity and the protection of human rights, as he addressed fellow foreign ministers at the meeting of the Organization for Security and Cooperation in Europe in Vienna this week.

Emotional debates break out in Saeima in regards to automatic access to state secrets

During the last meeting, very emotional debates in regards to automatic issue of access to official secrets were held. Proposals were voiced both in support of this and against. The proposal was declined in the end.

UK: EU citizens inside country «will be able to go on living as before»

In the talks on the UK leaving the European Union, London and Brussels have managed to agree on such key issues as the future of EU citizens within the UK and the border between Ireland and Northern Ireland, which will allow diplomats to move on to talks on the future relations between the bloc and the country after their divorce.

Polish head of government Szydlo resigns

The Prime Minister of Poland, Beata Szydlo, has stepped down, hours after surviving a no-confidence vote pushed for in the Sejm by the opposition.