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Economic Diary. Latvia 6th week of 2012

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The news that the New Wave contest could leave Latvia, and the GDP of our country increased by 5% in the fourth quarter of the last year, more important news – important for each of us individually and for the whole of our economy in general remained largely unnoticed.

In the web of liberty

It is not often when the residents of Latvia have the opportunity to act as part of the big and friendly Europe. But this week brought a perfect reason for that: the Minister of Economy Daniels Pavluts decided to slow down the ratification of the Anti-Counterfeiting Trade Agreement (ACTA), which caused an enormous public backlash, and with his help Latvia became part of several countries which refused to accept this agreement on their territories.

ACTA already became a reason for national protests in many European cities. This Saturday protest marches will take place in Poland, Czech Republic, Slovakia, Romania, Germany, Great Britain, Austria, Italy, Belgium, Bulgaria, Croatia, Denmark, Estonia, Lithuania, Finland, Greece, Switzerland, Hungary, USA, Canada and others. Latvia also keeps up with the progress of the European society: on Saturday, the protest march will take place near the Ministry Cabinet building.

ACTA was signed on January 26th this year in Tokyo by 22 European Union member states, Australia, Canada, Mexico, Morocco, New Zealand, Japan, Singapore, South Korea, Switzerland and USA. The goal of the agreement – is to increase the international intellectual property protection standards, including the protection from medication and other product forgery. However the rage of the people was cause by the rule about file-sharing hosts. The Internet community decided that, ACTA will significantly reduce their internet freedom. And a wave of protests covered the world. The internet – is a dangerous force.

Let’s make the GDP swiftly

Central Statistical Bureau of Latvia has published the data concerning the rise in the GDP during the fourth quarter of 2011. According to a quick review of this index, the GDP increased by 5%. It increased thanks to the great work carried out by the manufacturing (+4%) and trade (+9%) enterprises, as well as fiscal stimulation which increased the collection of the taxes by 9%. The construction sector also played a big part in increasing the GDP.

Even though the finalized data about the true increase of the GDP will be published by the Central Statistical Bureau only on the 9th of March, several experts and economists hastily commented this figure. «This is the largest GDP increase among the European Union member states», – Bank of Latvia economist Igor Kasyanov claims.

Minister of Finance Andris Vilks was also happy like a child: «The GDP increase index shows, that the decrease of the economic activity in the Euro zone did not scar Latvia. The increase rates remain to be positive».

The desire to stand up and give loud: «Hurrah!» three times was quelled however.

This is when the Nordea Banks Senior economist Andris Strazds, stood up and said that the finalized GDP data will most likely be significantly less than the initial quick review carried out by the CSB. «Looking at the statistics of the fourth quarter of 2011, clearly nothing is clear,- the expert ponders. – The indexes of the manufacturing industry and trade, which make up 30% of the Latvian economy, are dropping. Furthermore, these specific branches accurately reflect both external and internal demand. Manufacturing industry is directed towards export, and trade is directed towards the local market. If the indexes of these branches drop – it means that the demand drops as well. With this situation, it is difficult to understand just how did the Latvian economy managed to grow at all. This should mean that other sectors of the National economy should have had an increase of no less than 2% in the fourth quarter, which is unlikely. The answer for this riddle is due to be revealed in one month’s time, when the CSB publishes the finalized statistics. And it is possible that the second index will be significantly lower than the first», – Strazds believes.

Thankfully there are people living in our country that can think and are capable of resolving mathematical problems in their mind. A pity they do not work as ministers. Well, Mr. Vilks was a good economic analyst, while working in Swedbank. It seems that the minister’s post requires analyzing figures differently.

Kirsons’ repentance

The guru of the Latvian business, the owner of the largest Lido fast food restaurant network in Latvia, Gunars Kirsons made an important statement this week. He said that his largest mistake was the opening of enterprises not linked to the sphere of public catering. This, according to Kirsons, led to many of his financial problems, and problems of the Lido, which was considered to be an unsinkable «titanic» several years ago. His second largest mistake he believes to be the beginning of the process of extrajudicial legal defense. «Only jurists can make money from that, I saw no result whatsoever»,- the businessman claims.

His business was also undermined by the expansion of the international companies of McDonald’s and Hesburger to the Latvian market. «Even my grandson prefers to go there. And I have to convince him to go to Lido», – Kirsons admits.

We can only vaguely imagine how hard it was for the owner of Lido to voice these statements, since the company was a leader on the Latvian market for more than 20 years; the only local company of that kind and scale, which owned a restaurant in Tallinn and planned to open a branch in Kazakhstan. Lido on the Krasta Street was a place of interest in Riga, where many visitors of our country gladly went to dine. This is why it is no exaggeration when we say that the problems of Kirsons and his Lida – are our shared problems.

To catch up to a wave

Organizers of the New Wave contest of young singers report that the event will no longer take place in Jurmala, because «collaboration with the Jurmala City Council reached a critical point, after which further collaboration is not possible». The new site for the contest could become Riga or the Italian San Remo, or the Lithuanian Palanga, or the Russian Sochi…

The Latvian Hotel and restaurant association call for an emergency: the guests of the contest brought almost LVL ten million each year. The head of the Latio Company Edgars Sins warns that the lack of the New Wave in Jurmala will cause a drop in resort real-estate by 10-20%. Rent prices could suffer the same drop. But, if the contest relocates to Riga, the capital’s real-estate, Riga hotels and restaurants will benefit. And Jurmala will not suffer as much, because the distance between Riga and Jurmala is small. But if the New Wave leases Latvia for good, the first scenario is likely to come true.

The talks about the contest’s likely departure from the territory of our country became more apparent after the operatives of the Corruption Prevention and Combating Bureau interrogated the Russian millionaires – the «father» of the contest and composer Igor Krutoy and the Chairman of the New Wave organizing committee Alexander Shenkman during the last New Wave. Both were interrogated in relation to the deals with Jurmala real-estate, likely to be linked to the leader of the LPP/LC, aka the oligarch, aka the «bulldozer» Ainars Slesers.

 

«And tore out my sinful tongue»

The Saeima has conceptually approved of the amendments to the Law of labor during the first hearing, amendments which forbid the employer to demand the knowledge of certain languages, if they are not used in fulfilling work obligations. 60 parliamentary deputies voted for the amendments. The authors of the bill admit, that the amendments are developed so that to stop the discrimination of job seekers, who do not speak Russian. From now on employers are forbidden to present disproportionate linguistic requirements in their job offers, during interviews, excluding the cases if the completion of the work obligations is impossible without the knowledge of a certain language. Legislators note that more and more employers unfairly demand the knowledge of foreign languages, usually Russian, even in the cases when the specifics of the businessman’s work is not linked to using Russian language.

Remember the poor Latgalian

This week, about 50 residents of Latgale came to the Saeima building, to express their protest against the limitations for transporting excise products. Afterward, they went to meet with the President of Latvia, to ask him to come up with a legal initiative and return the order of border crossing and excise goods transport.

«The previous regional policy did not provide the desired effect. This is why a fresh approach is needed not only to save the catastrophic situation in Latgale, but also to ensure a long term development of the region.»- The protesters wrote in their message. They also noted that there is a high level of unemployment in Latgale, a weak business environment, apathy, alcoholism, social estrangement.

Since January the 1st 2012, the new border crossing order between Belarus and Russia became in force; according to it the amount of imported alcohol, cigarettes and petrol is limited to a minimum. This, according to the protesters, undermines the family budgets of the majority of Latgale residents. «For the most of us this kind of trade – is the only way to survive, feed our children and pay taxes»,- they believe.

The Minister of Regional development Edmunds Sprudzs reacted strictly to this protest act, claiming that, Latgale’s economy cannot be based on «legalized contraband».

Even though this might sound harsh to the residents of Latgale, but, maybe the new restriction will help the region’s economy to start developing in a civilized way. Until now Latgalians, who had the right to cross the borders of Belarus and Russia, where the excise products cost twice or even three times cheaper, using a simplified vise regime, did not have a stimulus to search for a normal job and start a normal business.

Does Dombrovskis have a plan?

The now approved «Valdis Dombrovskis’ government plan of actions» with the listed number of objectives the current Ministry Cabinet needs to handle before the next Saeima elections, has been mostly unnoticed on the background if these aforementioned events.

All and all the government has come up with 645 objectives in six key branches – the development of the human capital, creating an effective and innovative economy, effective control of the territories and the preservation of nature, State rule, cultural environment and creating Latvia’s image abroad. Every position has the success indicators.

For example: by 2014, as part of the creation of an innovative and effective economy the government is obliged to guarantee that Latvia becomes part of the list of 50 countries, which have a high competitive index. In the sphere of «Rule» the government promises to introduce Latvia into the 20 best countries for business by 2014. As part of improving the cultural environment the ministers promise to make sure that the share of cultural services and creative industry in the GDP of the country reaches 2%. And so on – in the same steamed up pace.

After the protests of the poor Latgalians, who were deprived of their last cheap pack of cigarettes and vodka, it is unclear what exactly to wish the government.

Our borders

And finally, this week Latvia has overcome another psychological barrier. The price of type 98 petrol at the Statoil petrol stations has exceeded one lat. And not too long ago the price of 90 santims per litre seemed like an impossible price. But we managed to overcome that. There are no fewer cars out on the streets. And this means that life goes on, no matter what.

Ref: 017.109.109.625


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  1. Maedhros says:

    Look better!
    I spend now a third of what I spent 3 years ago in gasoline, while the price almost doubled.
    There are fewer cars in the streets!
    (a look to the gasoline volume sales could help)

    Thumb up 0 Thumb down 0

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