Latviski English По-русски
Friday 23.03.2018 | Name days: Mirdza, Žanete, Žanna

Economic Diary of Latvia. Although in the rich club, there is not time to relax

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUA long-standing event finally took place this week – the Council of the Organization for Economic Cooperation and Development approved Latvia to join the so-called rich countries club.

This provides an opportunity for more successful development of the country, as noted by Latvia’s Foreign Affairs Minister Edgars Rinkevics. Latvia’s joining of OECD has been one of the country’s main priorities for a long time.

As an OECD member state, Latvia will be able to use experience and knowledge of more developed countries and experts to help further develop all sectors of national economy and the general level of quality of life of the population. ‘Membership in the organization of some of the most economically developed countries is not an automatic guarantee for welfare,’ – believes Rinkevics.

Deputy Secretary General of the organization Douglas Frantz has noted that Latvia has managed to realize the necessary reforms for joining OECD in a very short period of time. Nevertheless, there is not time to relax. He emphasized that Latvia will join the organization with high standards, and this will open the way for unlimited possibilities to Latvia.

Frantz also commended Latvia for doing so much in such a small period of time, comparing it to sprinting. Latvia’s membership in OECD will help the organization itself to change, he said. At the same time, Frantz also mentioned that membership in OECD is only the beginning.

The next step after the decision of the OECD Council will be the signing of the official documents regarding Latvia’s joining of the organization, which will take place in Paris on 2 June. After the signing of the document and its ratification in the Saeima, Latvia will become a full member of OECD.

Business is emerging from the shadow

Another piece of good news that surfaced this week states that the proportion of grey economy in Latvia had declined by more than 1% in 2015 (in comparison with the previous year). In 2015, the index had declined to 21.3% of GDP, according to the Grey Economy Index study by SSE Riga. In 2014, the share of grey economy in Latvia was 23.5% of GDP. This index is calculated every year based on results of a survey of entrepreneurs.

44.4% of grey economy in Latvia is made up of unaccounted income, 34.9% – envelope wages and 20.7% – unregistered workers.

According to Economy Minister Arvils Aseradens, Latvia’s economy has changed and has reached a certain level of maturity with the recent decision to allow the country to join OECD.

Aseradens believes that is necessary to focus on two problems – insolvency process and grey economy. Speaking of grey economy, the minister expressed his satisfaction with the fact that entrepreneurs have become involved with solving problems related to grey economy.

Businessmen, in the form of Latvian Chamber for Commerce and Industry, Latvian Employers’ Confederation and Business Against Shadow Economy association, have prepared their own proposals to combat grey economy and its symptoms. Proposals include the refusal of application of excise tax on coffee, introduction of a monthly tax of EUR 286 on taxi transports, active combating of piracy and introduction of a receipt lottery – when consumers who submit receipts to the State Revenue Service to help authorities combat dishonest traders take part in a special lottery.

Entrepreneurs also propose developing a medium-term tax policy for the country and tie it to Latvia’s national development plan for 2014-2020. It is highly important to ensure stability and predictability of the country’s tax system, reduce the burden on labour force without increasing the administrative burden and review mandatory state social insurance fees.

Businessmen also propose introducing mandatory health insurance. Other related proposals include PIT reliefs for companies that re-invest their revenue, adopt a reverse order to VAT payment and cancel the tax on lightweight transports for taxi companies.

The new plan for combating grey economy will be presented on 10 June 2016.

Signs of stagnation

And although there are things Latvia can be proud of on a macro level, the actual situation with the country’s micro-economy is demonstrated well enough by the real estate market and consumer prices.

According to data from Balsts, Riga’s real estate market is not behind that of Vilnius and Tallinn.

The real estate market in Tallinn managed to recover after the crisis in a couple of years – the current price change in comparison with the highest point is only -9% at the moment. In Vilnius, the real estate market is developing more slowly – the price change in comparison with the highest point is currently -32.5%.

In Riga, the average price in comparison with the highest point is currently 58% lower. And although the number of purchase/sale deals in Riga has grown 26% since the beginning of 2016, compared with Tallinn and Vilnius, improvements are minimal and do not provide a clear enough picture for the future, as noted in Balsts.

The fact that deflation remains in Latvia is demonstrates that there still is a great degree of instability in the country. Although consumer prices have been growing for the third consecutive month in Latvia (0.4%), they remain below prices of 2015 (by 0.8%). It is likely that annual deflation will remain for the entirety of the first half of the year, according to Swedbank.


Leave a reply

MEP: operations of certain banks in Latvia ruin the country’s reputation

Money laundering is a problem in Latvia, because the activities performed by certain banks ruin the country’s reputation, said member of the European Parliament Krišjānis Kariņš in an interview to Rietumu Radio.

Harmony believes education only in Latvian language is discrimination

Members of Harmony’s Saeima faction have turned to President of Latvia Raimonds Vējonis with a request to halt the parliament’s newly approved amendments to the General Education Law and Education Law regarding education only in Latvian language.

Opinion: UFG and For Latvia and Ventspils were in favour of Vejonis congratulating Putin

Latvia’s President Raimonds Vējonis sent his congratulation to the newly-elected President of Russia Vladimir Putin in order to secure political capital for himself during next year’s presidential elections, says Assoc. Prof. Ojārs Skudra from Social Sciences Faculty of the University of Latvia.

Commissioner: Latvia should provide a clear response to situation in its financial sector

The scandal in Latvia’s financial sector has been reported far and wide in the European Union. This is why it is highly important for Latvia to provide a clear reaction to all this, said Vice-President of the European Commission for Financial Stability, Financial Services and Capital Market Union Valdis Dombrovskis.

Don't joke about bombs at Tallinn Airport, they take it seriously

Estonia's largest airport in Tallinn has from early 2017 received 14 threats of the presence of explosives in the air-travel hub, most of which have been discovered to be just jokes said at the wrong place.

Minister: learning in a single education system using state language is only obvious

Education using state language is our way of ensuring sustainable development of our nation, says Latvia’s Education and Science Minister Kārlis Šadurskis.

Estonian banks close foreigner accounts in wake of ABLV closure

In the wake of the closure of ABLV Bank in Latvia and alleged money laundering via the Estonian branch of Danske Bank, lenders in Estonia are closing the accounts of foreigners, but this threatens the country's successful e-Residency programme aimed at attracting foreign investors.

Latvian Saeima conceptually supports limiting the Bank of Latvia governor’s authority

The Saeima has supported amendments to the Law on the Bank of Latvia in the first reading. Amendments provide that the term of the bank’s governor, his deputy and council members will be five years, as reported by Saeima’s press-service.

Baltic shareholders agree to keep Baiba Rubesa in charge of RB Rail

RB Rail CEO and board chairperson Baiba Rubesa will keep her post. This was decided by shareholders during the 22 March meeting. «The supervisory council had previously mentioned the CEO’s contribution to the company’s development. Still, we intend to find solutions and continue realizing Rail Baltica project,» said RB Rail Supervisory Council chairperson Riia Sillave.

Syrian rebel groups in eastern Ghouta announce ceasefire

In the besieged eastern Ghouta territory in Syria, which has been under heavy air strikes and artillery fire for about a month, several opposition rebel groups have agreed to ceasefire.

EU member states on Skripal attack: «Highly likely» Russia was responsible

The European Union has stated it would recall its ambassador to Moscow for consultations after heads of member states and their governments agreed it was very likely that Russia was responsible for the attack with a chemical weapon on a Russian-British double agent.

Weather to remain cold in Latvia until Easter; more snowfall expected

Weather in Latvia is expected to become cold again after a brief period of warmth. Air temperature will drop again at the beginning and the middle of next week; some areas may experience frost again, as reported by Latvian State, Environment, Geology and Meteorology Centre.

Farmers in Latvia dissatisfied with resolution of electricity-related problems

Two months have passed since farmers in Latvia had received unjustifiably large electricity bills. Countless meetings and discussions have taken place in those two months. Unfortunately, no decisive measures have been undertaken to resolve the problem. Farmers are confused with decision-makers’ incisiveness in a matter important to the national economy, as noted by the Farmers’ Saeima.

Life after 25 May: is this the end for free publication of photo galleries from events?

Many of us like to check out photos from concerts, conferences or sport events on gallery portals and social networks to have a look at guests of those events. However, after 25 May, when General Data Protection Regulation (GDPR) comes into force, the situation will no longer be the same.

Saeima to establish legal framework for Baltic cooperation in disaster prevention

On Thursday, 22 March, Latvian Saeima supported a legislative draft, ratification of which will help create legal framework with other Baltic States in prevention of disasters, as reported by the parliament’s press-service.

Number of complaints with postal services on a rise in Latvia

Public Utilities Commission has compiled information about complaints submitted by residents in regards to postal services in 2017. The number of complaints has increased alongside opposing views about package terminals – the regulator has received 37 complaints in total.

Output of livestock products in Latvia increased in 2017

Compared to 2016, output of meat grew by 4.6 % and output of milk by 1.4 % in 2017. In 2017, in Latvia 91.2 thousand tonnes of meat were produced, which is 4.0 thousand tonnes or 4.6 % more than in 2016. The most significant increase was observed in the output of poultry (of 11.3 %) and pork (4.7 %).

Turkey's offensive in Syria condemned by NATO ally Germany

Angela Merkel, the head of the German federal government has stated that Turkey’s military offensive in the northern Syrian town of Afrin was unacceptable and she blamed Russia for simply watching, while attacks by Syrian government forces on besieged eastern Ghouta continue.

Finance minister still believes tax reform in Latvia has brought results

«The tax reform has given us the results we had expected, especially in regards to combating envelope wages,» said Latvia’s Finance Minister Dana Reizniece-Ozola in an interview to 900 seconds programme of LNT.

Planned hospital reorganisation in Lithuanian regions irks both mayors and patients

If the plan of the Lithuanian Ministry of Health to overhaul treatment services in the provinces does not hit a snag, the rural hospitals will be soon providing only essential care and nursing, the focus will be on out-patient care and treatment will be available only in larger county hospitals.

Ventspils beach high in popularity this week; Lembergs gets spotlight time as well

Ventspils ended up in the spotlight in an unusual way this week: seals washed up on the beach there. Animal Freedom emphasizes that human contact with baby seals would hurt them. Residents are asked to maintain at least 50 m distance from them. However, the suspended Mayor of Ventspils Aivars Lembergs decided to take photos with baby seals and publish them on his Facebook profile.

Ombudsman: problems in nursing homes and social care centres are associated with lack of funding

Problems in nursing homes and social care centres are largely associated with lack of funding, because it is not possible to perform high-quality work using currently available resources. This is the responsibility of ministries and the government, as ombudsman Juris Jansons mentioned in an interview to Latvijas Radio.

Estonian music authors receive record royalties for 2017

The organisation, which is tasked by collecting royalties for local and foreign music in Estonia, the Estonian Authors' Society, has received six million euros in royalties in 2017, which is its record level.

Facebook sorry for permitting exploitation of 50 million user data in politics

Facebook CEO Mark Zuckerberg has apologised for the social network failing to ensure enough privacy to its users that allowed for data on about 50 million of its users to abused by a political consultancy firm.

Zhdanok’s replacement to promote non-citizen matter in European Parliament

Miroslavs Mitrofanovs, who has taken Tatyana Zhdanok’s place in the European Parliament, plans to promote the matter of non-citizens in the institution.