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Wednesday 26.10.2016 | Name days: Kaiva, Amanda, Amanta

Economic Diary of Latvia. Do gas molecules have nationality, or who can we trust?

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia’s exports to Russia have fallen 25% over the course of the past several months. Latvian Economy Minister Dana Reizniece-Ozole admitted this loss this week.

At the same time, however, she optimistically announced that the loss of the Russian market only served to motivate Latvian entrepreneurs to search for alternative markets more actively. On top of that, the loss of the Russian market only strengthened Latvian producers against crisis situations.

Unfortunately, producers have become stronger by a little, because the 3% increase of exports of Latvian goods to other countries is not enough to cover the losses caused by export declines to Russia. Russian ambassador in Latvia Aleksandr Veshnyakov said last year that the reduction of trading between Russian and Latvia may reach 30-40% in 2015.

In an interview to TASS, Dana Reizniece-Ozola mentioned that gas molecules do not have a nationality. With that, Latvia is prepared to buy gas from Russia if it turns out cheaper than offers of other countries. According to her, offers from alternative gas suppliers will motivate Latvijas Gāze and Gazprom to offer better prices.

In spite of mutual sanctions between Europe and Russia, nine Latvian companies will take part in the international Prodexpo exhibition of food and drinks that will take place in Moscow at the beginning of February 2016. This was announced this week by the Latvian Investments and Development Agency this week.

The national stand organized by the agency will feature products from companies like Rital D, Enhars, Pure Chocolate, Velte L, Daugavpils Meat Processing Plant, Rаmkalni Nordeco, Jaunkrasts, L.Е.V. and Kronis.

According to information from the agency, Russian remains Latvia’s largest export partner in terms of food products in spite of sanctions – exports of food products to that country reached 29% of all exports of Latvia’s food sector in 2015.

Cautious optimism

While the big companies keep focusing on exports, medium and small companies in Baltic States are playing safe on the local markets. Such is the conclusion of the latest SEB Baltic Business Outlook.

The majority of the most optimistic small and medium companies (those that expect turnover growth of above 15%) are found in Lithuania – 20%. The proportion of optimistic companies is lower in Latvia and Estonia. 16% of respondents in Latvia expect turnover growth of more than 15% this year. 56% expect turnover to grow up to 15% this year.

According to SEB Bank social economy expert Edmunds Rudzitis, uncertainty and global economy risks as well as geopolitical tension continue affecting the mood of small and medium companies. Under influence from external factors, Latvia’s economy has demonstrated moderate growth. Weak global growth and recession on certain markets important to Latvia’s exports also negatively impact entrepreneurs’ expectations about the future. Companies that have managed to adapt to new market conditions and diversify their products and export markets are currently very optimistic about the future.

Similar to one year ago, approximately a quarter of small and medium companies try to focus on the local market. They plan to increase turnover at the expense of growing purchasing power of local residents. Unlike other Baltic States, the number of entrepreneurs hoping to explore new export markets has grown by eight percentage points and is now 16%.

Companies have no plans to change their established business model this year – only 8% of respondents mentioned having plans for innovative solutions in this area. The number of companies planning new products and personnel training is definitely on a rise in Latvia.

Record drop

The caution of small and medium-sized companies in Latvia is confirmed by Eurostat’s assessment of real estate prices, which is traditionally considered the index of the general state of things in economics.

As it turns out, the price of apartment in Latvia had declined 7.6% in Q3 2015 in comparison with the analogous period of 2014. It is an absolute record among 28 EU member states.

According to data from the statistical bureau, the real estate market demonstrated moderate growth for the most part in 2015. Housing prices in the EU grew by an average of 3.1% in 2015. In Eurozone, prices grew by an average of 2.3%. Prices grew the most in Sweden (+13.7%), in Austria (+9.3%), Ireland (+8.9%). The most rapid decline of prices was registered in Latvia (-7.6%), followed by Croatia (-3.0%), Italy (-2.3%) and France (-1.2%).

In Lithuania, housing prices grew 3.4% in the July-September period of 2015. Prices in Estonia grew by 4% in comparison with 2014.

Price decline in Latvia has been continuing for several years. According to experts, this is mainly due to the massive emigration of Latvians to other EU countries and changes to requirements for the issue of residence permits to foreigners.


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