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Friday 22.06.2018 | Name days: Ludmila, Laimdots, Laimiņš
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Economic Diary of Latvia. Cherchez la femme

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULong queues of trucks have formed on the border with Russia. This has not been seen since the so-called fat years in Latvia. There is some more good news, and women are the reason for that.

As the French say whenever strange things happen – cherchez la femme. This phrase is applicable for the situation with trucks that has recently formed on the Latvian-Russian border. Considering the years of the crisis and what that brought and sanctions against Russia, many have forgotten what it is like to wait for many hours to be processed at border checkpoints.

As explained at the State Revenue Service, the formation of long queues is tied to the increase in seasonal economic activity and increase in volumes of quickly expiring cargoes, specifically – flowers. This is the product that was being transported to Russia in large amounts for the upcoming International Women’s Day, which is widely celebrated in Russia. People who remember the Soviet Era remember that flower cultivation and their sale on 8 March were good business for many Latvians. It seems that not much has changed since then. The only difference is that now Latvia is used as a transit corridor to carry flowers from other EU countries to Russia.

This situation may also be tied to efforts to increase control of Russian border control authorities on the Belarus-Russian border. According to unofficial information from Latvian State Revenue Service, carriers from EU countries and other people are allowed to cross the Russian-Belarus border at a restricted pace. This is why the international transport flow has been re-routed through Latvia. This is having a serious impact on the processing capacity of border checkpoints. As a result, long queues of vehicles have formed at the border.

According to information from Terekhovo border control point, the number of trucks waiting to be processed was 540 on 1 March. A similar situation was noted on previous days: no less than 360 trucks were noted on 26 February and onward. The time it takes to be approved to enter Russia ranges from 37 to 73 hours.

The size of the queue, the time it takes to be processed and the processing speed of the border control point are all unprecedented for this time of year.

SRS has not seen anything quite like this before. There had been no queues in 2015 and 2014. The time it took trucks to be processed and approved was very short – an average of 300 trucks was approved for entry to the Russian Federation every 24 hours. This number came up to even 450 in 2013. Waiting time did not exceed 1-2 hours.

The absolute record in terms of length of the queue of trucks – more than 2,000 – with waiting time of up to 5 days was noted in the ‘fat’ 2006.

Blacklist

This week turned unprecedented for the State Revenue Service as well. As planned, SRS Director Inara Petersone submitted to Finance Minister Dana Reizniece-Ozola a list of SRS and Finance Police officials suspected of dishonest practices. In addition, Petersone also submitted proposals on options for getting rid of dishonest workers. There is currently no information available in regards to any names or specific departments of SRS affected by the blacklist. Also, Petersone does not deny that the list may be expanded.

One head has been removed so far. Head of the Customs Office and deputy director general Talis Kravalis has been dismissed. There is currently no information to suggest he was on the blacklist. The official reason for his dismissal was that Kravalis permit to access official secrets had expired and no request had been filed by him to extend the permit.

As noted by Dana Reizniece-Ozola, an enormous shadow of corruption currently looms over SRS. This leads to residents losing faith in the service and motivation to pay taxes.

The great and terrible GDP

Some good news did come this week. Latvia’s Gross Domestic Product’s growth rate was 2.7% in 2015, as confirmed by the Central Statistical Bureau of Latvia. In actual prices, GDP grew by nearly EUR 24.4 billion.

Economy Ministry expects GDP growth to reach 3.2% in 2016. The ministry reports that growth of the national economy will be decided largely by domestic demand, which secures growth of salaries and reduction of unemployment.

Nordea Bank’s analysts are more cautious about the growth potential of Latvia’s national economy. The bank has reduced GDP growth outlook from 3% to 2.7% for 2016. According to them, private consumption and investment growth will contribute to GDP growth this year.

The mood on external markets is not exactly too optimistic, which is largely due to geopolitical conflicts, unclear perspectives in the EU and slow economic development in China.

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