bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Sunday 24.06.2018 | Name days: Jānis
LatviaLatvia

Economic Diary of Latvia. In the zone of low inflation

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUPrices of goods and services remain largely the same in Latvia. According to data from the Central Statistical Bureau of Latvia, the average annual level of consumer prices in Latvia increased by a mere 0.6% in June, as compared to the same month of 2014.

There is nothing good for the economy that, even though consumers tend to believe the opposite: prices on goods become cheaper and therefore the goods become more easily accessible. However, according to traditional economic theories, a healthy economy’s inflation should be within 4-5%. According to Governor of the Bank of Latvia Ilmars Rimsevics, Latvia’s economy is currently in a state of ‘healthy stagnation’.

The head of the Bank of Latvia has made multiple interesting announcements lately. This week, he announced that Latvia will definitely not suffer from the crisis in Greece. He added that Eurozone will only become stronger in a long-term perspective from it. Latvia did not provide Greece money and its trade relations with it are minimal. Rimsevics said Eurozone is very stable at the moment.

Eurozone, in which Latvia holds membership, does, in fact, demonstrate signs of stability. The exchange rate between euro and dollar has declined, but it is insignificant (around USD 1.1 = EUR 1).

The debt crisis in Greece has not yet made any significant impact on the monetary bloc. It has, however, impacted countries that are not part of Eurozone – Sweden, Switzerland, UK and Poland. As noted by Bloomberg, the Greek crisis has found a new corridor for spreading into other countries – through the currency market with a volume of USD 5.3 trillion per day.

National banks in Sweden and Switzerland are worried about the perspective of euro’s weakening due to the Greek crisis. Both regulators try to spark up inflation, but the strengthening of currencies will make this task more complicated. The Bank of England, whose pound sterling jumped a seven-year peak last year, is also worried about the slowing of growth of the British economy under such an exchange rate.

«Countries with currencies like the Swedish krona and the Swiss francs should be worried about euro’s weakening,» – as Bloomberg reports the words of Stewart Bennet, London head of currency strategy in the largest bank of Spain Banco Santander SA. Such a development would make low inflation combating measures more complicated. The Bank of England is not likely too happy about the strengthening of the pound sterling as a security asset. The European problem has become a global risk on the currency market. (This is where the barely visible to the majority of people link between healthy currency and healthy price rise should be mentioned)

In June, when negotiations of the Greek government with creditors stopped at a dead end, the Swiss central bank sold francs to hold off the strengthening of the currency. The Swedish central bank then unexpectedly reduced the key interest rate, which was already at zero, in order to prevent krona’s strengthening. Leaving it the same could have caused deflation. The Swedish regulator had said it then that it is hard to predict the consequences of the Greek crisis.

One would ask: how can the problems that have begun in those countries possibly affect us? The answer is that these problems can have a most direct impact: plenty of Latvia’s living and working in those countries send money to Latvia. So what Mr. Rimsevics says about the insignificance of the Greek crisis for Latvia is open for debate.

Latvia’s green gold

Economy is interesting mainly because it’s full of different paradoxes and often subverts cleaver theories. For example, Latvia can earn around EUR 300 million annually on Russia’s sanctions against…Finland. This will happen if Russia stops supplying wood to Suomi and the Finnish decide to cut Latvian forests.

The head of the Russian Forest Association Department of Metsäteollisuus Jukka Halonen mentioned in an interview to Yle radio station that the possible restraining measures by the eastern neighbour came as a surprise for him. According to his information, 13% of wood (equal to EUR 300 million annually) for Finland’s wood working industry came from Russia in 2014. Part of the losses from it can be compensated at the expense of Finland or other Baltic Sea region countries, including Latvia.

Wood processing industry remains the sector of Latvia’s processing industry that provides positive growth dynamics. According to information from the Central Statistical Bureau of Latvia, this industry’s output volume grew by 6.5% in May 2015.

Even though not all Latvian enterprises are doing all that well, Latvia’s production industry is fairly well off. Under a more detailed review it is clear that the decline is noted mainly in the industries that have had strong ties with Russia up until a certain point in recent history. This mainly applies to food production and textile industry.

At the same time, Latvia’s largest industrial sector, wood processing, remains in the positive: production output had grown by 2.7% in May and by 6.9% in the past five years. Statistics were affected by the launch of a large granule production process in Gulbene in the second half of 2014 and the positive situation on the European market of saw materials.

However, as noted by Igor Krasavtsev from Latvian Forestry Federation, June is not expected to be all that successful. Hurricanes in Germany and Poland have devastated forests there. Now there is a lot of cheap raw materials there to make Latvia’s products less competitive.

Ref: 017.109.109.6987


Leave a reply

SRS uncovers numerous violations more than half of inspected companies

State Revenue Service’s Tax Control Office performed a total of 305 thematic inspections of employers in Latvia in Q1 2018. Authorities recorded violations in 171 inspections, according to information from SRS.

Third level pension plan deposit volumes reach new record value

Residents’ interest for pension savings remains high. The volume of deposits made to private pension funds in the first three months of 2018 has reached a new historic peak: a total of EUR 16.5 million has been paid to 3rd level pension accounts, which is 11.6% more when compared to the same period of 2017, as reported by Finance and Capital Market Commission.

Petrol station network in Latvia caught performing fraudulent activities with diesel fuel

State Revenue Service’s Tax and Customs Police have uncovered and put an end to a fraudulent scheme with diesel fuel performed by some network of petrol stations in Latvia, as confirmed by the service.

Kaimiņš: I believe CPCB is performing a political order

In the evening of Thursday, 21 June, Corruption Prevention and Combating Bureau released three people previously detained as part of a criminal process regarding possible illegal funding of KPV LV party – Saeima deputy Artuss Kaimiņš, his colleague Atis Zakatistovs, and businessman Viesturs Tamužs.

Latvia’s parliament conceptually supports new sanction regulations

On Thursday, 21 June, Saeima supported in the final reading amendments to the Law on International Sanctions and National Sanctions of the Republic of Latvia that are meant to improve sanction regime regulations to ensure efficient application of national and international sanctions, as reported by Saeima press-service.

Storm in Tallinn floods streets, cuts Croatia-Argentina match short on TV

A rain storm has hit northern Estonia on Thursday, flooding some streets in the capital Tallinn, damaged buildings and badly affected the broadcast of an interesting World Cup game.

American banks tested for financial stress show positive results

The U.S. has performed banking stress tests and found that the 35 largest banks operating in the country have enough funds on hand to sail safely through a severe financial crisis.

Saeima fires judge for coming to work in a drunken state

On Thursday, 21 June, Latvia’s parliament supported the proposal to dismiss Rezekne Court judge Arvis Garais from his post. 71 deputies voted in favour, no one abstained and no one voted against.

UK to have three requirements to EU citizens willing to remain in UK

For citizens of the European Union willing to continue living in the UK after the country leaves the bloc, they will have to submit applications and answer three key questions over the internet, according to the country's interior minister.

Weather in Latvia to be rainy and cool during Ligo; next week’s weather to be dry and hot

Weather at the end of the week in Latvia will be dictated by a cyclone. Because of that, there will be instances of rain on Ligo. Weather is expected to improve next week, however, according to Latvia’s State Environment, Geology and Meteorology Centre.

Lithuania’s blood plasma corruption scandal extends to Latvia

The former head of Lithuania‘s National Blood Centre, suspected of corruption and involvement in unlicenced activity, received more bad news this week from Latvia, where investigators of the Lithuanian Special Investigation Service had questioned the Latvian Health minister, Anda Čakša.

Administrative burden to be reduced for foreign students and researchers

The administrative burden will be reduced for foreign students and researchers, as well as all education and research institutions hosting them. This is provided by the amendments to the Immigration Law approved by the Saeima in the third reading on Thursday, 21 June.

Latvian Economy Minister endures no-confidence vote

Saeima declined opposition deputies’ request for dismissal of Economy Minister Arvils Ašeradens.

Swedbank economist becomes new member of Bank of Latvia Council

On Thursday, 21 June, Latvia’s Saeima approved Mārtiņš Kazāks in his new post as member of Bank of Latvia Council, as confirmed by Saeima’s press-service.

Pope Francis’ visit to Latvia will be a national holiday

Latvia’s parliament has approved in the final reading a law that makes 24 September – the day Pope Francis plans to visit Latvia – a national holiday.

ICT specialist numbers in Latvia are below Europe’s average level

In Latvia, information and communication technology specialists form only 2.2% of all employed people in the country, which is considerably below the average level in the European Union – 3.7%. Romania and Greece are the only two EU member states in which the number of ICT specialists is below Latvia’s, according to European Commission’s DESI index.

Hungary adopts prison sentence for helping migrants

Hungarian National Assembly has passed a set of laws criminalising with prison terms some help provided to illegal immigrants by non-governmental organisations.

Harmony plans turning to Constitutional Court to prevent transition to Latvian language in schools

«Why should this reform stay unrealized? It is because schools are not prepared for cardinal changes coming from dozens of other reforms that have already shocked the country’s entire general education system,» says chairman of National Minority School Parents Forum and member of Harmony’s work group in Konstantīns Čekušins.

Deputies detained in KPV LV criminal case not declared suspects yet

Saeima deputy Artuss Kaimiņš and businessman Viesturs Tamužs detained in the criminal process regarding possibly illegal funding of KPV LV party have not yet been declared suspects. Both are currently in police custody. It is likely Kaimiņš will be released later today, 21 June.

Production of mines and grenades planned in Estonia

As the Estonian parliament has adopted new rules on military arms and ammunition production in the country, local defence firm Eesti Arsenal has voiced its plan to build a factory in Estonia to make military explosives.

Total tax debts in Latvia reached EUR 1.224 billion in June

At the beginning of June, total tax debts in Latvia, including topical, halted debts and extended repayment terms were equal to EUR 1.233 billion, which is 0.6% less compared to May, as reported by State Revenue Service.

Switch off internet nationwide during exams – Algerian approach

In an attempt to prevent cheating during secondary school exams, the north African nation Algeria, has turned off internet in its whole territory.

Control Service proposes kicking out shell companies as intensely as offshore companies

Shell companies in Latvia should be combated with the same intensity once shown to offshore companies, says chief of Anti-Money Laundering Service Ilze Znotiņa.

EU imposes tariffs on blue jeans, motorcycles and other U.S. export goods

The European Union will introduce retaliatory tariffs against U.S. exports on Friday, EU Trade Commissioner has stated a top official has stated in the bloc's reaction to Washington imposing steep duties on steel and aluminium earlier in June.

Latvia’s Saeima proposes improving job-combining rules for state officials

On Wednesday, 20 June, Latvian parliament’s Public Administration and Local Government Committee decided to submit for review amendments to the Law on Prevention of Conflict of Interest in Activities of Public Officials.

Newest comments