Latviski English По-русски
Friday 18.08.2017 | Name days: Liene, Helēna, Elena, Ellena, Liena

Economic Diary. Latvia now has a long-living Prime Minister

(No Ratings Yet)

Valdis Dombrovskis

This week marked four years since Valdis Dombrovskis approval as the head of the Cabinet of Ministers. This is a record in its own right: the average life expectancy of all of his predecessors was 9 to 11 months.

Dombrovskis’ victories

The Saeima approved Dombrivskis on March 12, 2009. He led the government in a fairly complicated period: the economic crisis was growing in strength, the state treasury saw a steep reduction in tax collection. The previous government led by Ivars Godmanis was forced to turn to international creditors. The government, which completely lost the trust of the people, was not prepared to carry out complicated reforms.

Dombrovskis and his ministers managed to stabilize state finances in a matter of several months. While budget deficit of 2009 was nearly 10% of GDP, that of 2012 reduced to a mere 1.5% of GDP. Consolidation was followed by painful reductions of state expenses in different industries and the increase of taxes. The fiscal burden started to decline in the last two years: PIT (increased from 23% to 26% in 2010) reduced to 24% in the beginning of 2013. It is expected to drop to 20% by 2015.

In 2009, Latvia’s economy experienced the largest GDP reduction in the EU – 18%. The economy reduced by a mere 0.3% in 2010. Latvia showed a 5.5% economic growth in 2011. Unemployment rate, which exceeded 17% in 2010, was only 10.9% in January 2013. Latvia successfully finished the international loan program a little over a year ago. The first emission of state bonds was carried out in 2011 fir the first time since 2008. International rating agencies Fitch Ratings and Standards & Poor’s restored Latvia’s ratings to the level of investment group.

In total, fiscal stabilization allowed Latvia to complete the Maastricht criteria. Best case scenario – the EU will decide to allow Latvia to join Eurozone in the beginning of 2014.

GDP exceeds expectations

Continuing the topic of government achievements it is worth mentioning that Latvia’s GDP increased by 5.6% in 2012. The data recently published by the Central Statistical Bureau of Latvia turned out to be notably better than the outlook given by experts some 12 months ago.

The largest contribution to this achievement was presented by export industries. In spite of the recession in Eurozone, they managed to develop fairly well. They also managed to stimulate and restore domestic demand – revive business oriented for the domestic market. However, economists warn: it is unlikely for such a surprise to tome to pass in 2013. According to their prediction, the current situation on foreign markets is more complicated now.

Analysts expect GDP will be largely contributed by the export of intellectual services: IT, communications and commercial services could be among the leading industries. Experts unanimously believe development rates of our small and open economy will reduce to 2.5-4% in 2013.

2 billion in reserve

Meanwhile, the State Revenue Service (SRS) has finally compiled the results is the campaign that took place in Latvia from March 1 to June 1 2012. As part of this campaign, residents that fall under specific criteria (having savings over 10 thousand LVL, real estate abroad and other assets) were required to report their state of property for 2011.

As a result the so-called zero declarations were submitted by 131.99 thousand people. The government initially expected a total of 70-120 thousand participants. 122 Latvian residents stated previously undeclared income for a total amount of 4.66 million LVL in their “zero declarations”. A total of 686 thousand LVL was paid in PIT by March 1. More than 4 thousand Latvians stated their owned real estate property in foreign countries. Furthermore, the campaign’s participants declared all kinds of vehicles they own abroad. In total, participants of the declaration stated a total amount of 2.29 billion LVL in cash and non-cash savings. More than half of all declared savings were stated in Euro, one-third – in Lat and a quarter in USD.

Righteous anger

The topic of taxation of micro-enterprises became actual once again. The recently opened for amendments Micro-enterprises Tax Law gave way for a number of officials to come forth with new initiatives. In particular, Elina Silina once again voiced proposals the realization of which would make the current regime (9% of revenue) non-beneficial and less available. She believes the acceptable amount of annual revenue for such enterprises should be reduced from the current 70 thousand LVL to 40 thousand LVL, but increase the rate to 15%.

The politician’s persistence has angered the management of the Latvian Chamber for Commerce and Industry, which once had devote much effort in order to convince the government to create special conditions for the industry of micro-business. The usually calm organization came forth with unusually anger-filled criticism. “I can only remind that a possible increase of the rate will contradict the tax strategy for 2011-2014 signed by business organizations and the Finance Ministry. Do we really want shadow economy to regain its hold?” – Chairman of the organization Janis Endzins asks.


Leave a reply

  1. Ilmars says:

    He has to ditch the Russian business culture of lawlessness and bring Latvian business legislation , and the court system up to the standard of the rest of Europe.
    Every week , we seem to have another scandal.
    I dont think he has the political will to take on entrenched interests.

    Thumb up 0 Thumb down 0

  2. Emils says:

    He is not different from the others.Politicians all the same just a bunch of corrupt. Russians and Latvians.

    Thumb up 0 Thumb down 0

Latvia’s export growth was moderately rapid in the first six months of 2017

Compared with the same period of 2016, Latvia experienced a moderately rapid export growth in the first six months of 2017, according to data published by Eurostat on Thursday, 17 August.

Latvia’s annual inflation in July was one of the highest in Europe

Inflation indexes in Latvia and the UK both reached 2.6% in July, which is one of the highest indexes in the European Union, according to data published by Eurostat on Thursday, 17 August.

Kirsis withdraws his candidacy in favour of Aseradens

Riga City Council member Vilnis Kirsis has decided to withdraw his candidacy from the race to become chairman of Unity in favour of a different candidate – Economy Minister Arvils Aseradens.

Rinkevics expresses Latvia’s interest in maintaining political consultations with Palestine

On Thursday, 17 August, Latvia’s Foreign Affairs Minister Edgars Rinkevics met with the leader of Palestine’s diplomatic mission in Latvia, ambassador Taissir Al Adjouri, to discuss mutual relations between Latvia and Palestine and the peace process in the Middle East.

Putin grins to the world’s seven billionth baby, Lithuania wary of border incidents

Russian President Vladimir Putin paid a visit this Wednesday to Kaliningrad, the westernmost point of Russia, but the reports about his trip in the Russian enclave and over the border in Lithuania were strikingly different.

Survey: red considered the safest colour for a car

Most Latvian drivers consider red to be the safest colour for a car. The most popular, however, is black, according to results of a survey by Virši-A fuel trader.

airBaltic’s number of carried passengers reaches a record in second consecutive month

Latvian airBaltic airline carried 393,312 passengers in July 2017, which is 21% more than the same period last year. The number of passengers carried by airBaltic remains the highest it has ever been in the airline’s history, BNN was informed by the company.

Brivais vilnis: nearly all fish processing companies are experiencing losses

Currently nearly all fish processing companies in Latvia are experiencing major or minor losses, says Brivais vilnis chairman Arnols Babris.

American helicopters to perform low-altitude flights within Latvia’s airspace

U.S. Air Force Brigade’s Task Force Phoenix helicopters, which are stationed in Latvia as part of Atlantic Resolve operation, will be performing low-altitude flights from 16:00 to 18:00 from Lielvarde to Dobele on Friday, 18 August.

Healthcare Ministry’s state secretary Karlis Ketners may be replaced

Latvian Healthcare Ministry may replace its state secretary Karlis Ketners. It is possible he will be transferred to work at Finance Ministry, as reported by LTV.

Suspects in Europe's insecticide egg scandal before Dutch court

In the Netherlands, two men have been in court in relation to the scandal of eggs containing banned insecticide that has caused an EU-wide health scare and cost millions of euros of damages.

Indian national with fake documents apprehended on Latvian border

An Indian citizen travelling from Moscow on a bus was caught at Terehovo border control point in Latvia for presenting officers a fake EU family member’s resident card. No criminal process was launched. The person returned to the country he was travelling from.

Latvijas dzelzceļš will not have to pay dividends from last year’s profits

The government decided on Wednesday, 16 August, that Latvijas dzelzceļš will not have to pay dividends from last year’s profits, which were EUR 880,998.

Latvian citizenship provided to 103 people

The Cabinet of Ministers has issued an order to provide Latvian citizenship to 103 people through naturalization.

Estonian Inbank's profits reach EUR 5.7 million in six months

Estonian financial services' provided Inbank made a profit of 5.7 million euros in the first half of 2017, which is a 429.4% increase compared to the respective period in 2016.

Agriculture Ministry invites residents to sign up for measures to support fisheries

From 21 August onward, Rural Support Service plans to start accepting applications for projects to receive support from European Maritime and Fisheries Fund’s action plan for development of fisheries in 2014-2020 as part of projects Innovation, Productive Investments in Aquaculture and Fishing and Aquaculture project processing.

Estonia seeks to improve reputation of state as employer

As the Estonian Ministry of Finance wishes to boost the reputation and brand of the Baltic country's public sector, it has announced a procurement tender aimed at preparing an action plan for reaching these goals.

Warning: there may be short-term problems with Swedbank internet banking functionality

Because of Swedbank’s planned IT modernization work scheduled for the night to Thursday, 17 August, there may be short term problems with payment card and internet banking functionality, the bank warns.

Aseradens: neither Usakovs nor Lembergs should be allowed to become prime minister

If he became chairman of Unity, Economy Minister Arvils Aseradens would mobilize democratic forces to prevent the possibility of either Aivars Lembergs or Nils Usakovs becoming prime ministers, Aseradens said in an interview to 900 seconds programme of LNT.

Caksa believes increasing wages for doctors would improve politicians’ credibility

The planned wage increase in healthcare could be the first step towards improving politicians’ credibility, says Healthcare Minister Anda Caksa.

Bill Gates donates USD 4.6 billion, reduces shares in Microsoft

The co-founder of the U.S. computer software firm Microsoft, Bill Gates, has allocated to charity 4.6 billion U.S. dollars (3.9 billion euros), which is the philanthropist's highest donation since the year 2000.

LOSP proposes using electronic packing slip system to reduce fraud

An electronic packing slip system for goods would be invaluable for agricultural goods, because it would help push out and reduce VAT fraud, says Latvian Agricultural Organisation Cooperation Council.

Latvia and Russia agree on exchange of additional 3,000 universal permits for cargoes

Latvia and Russia will exchange 7,000 universal permits for international cargo transports in 2017. This will be the largest universal permit volume in the past 15 years, as reported by Road Directorate.

Sierra Leone hit by tragic mudslide

A tragic mudslide has taken place in Sierra Leone, where flooding in the capital Freetown caused a mudslide, in which nearly 400 people have been have died.

Talks with potential KVV Liepājas metalurgs buyers to conclude in August

Talks with potential buyers of the insolvent KVV Liepājas metalurgs will conclude at the end of August, says representative of the company’s insolvency administrator Dzintars Hmielevskis.