bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Saturday 03.12.2016 | Name days: Raita, Jogita, Evija
LatviaLatvia

Economic Diary of Latvia. Lowering game

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis week the main state institutions of Latvia responsible for economy in one form or another competed with one another in their predictions for GDP growth in 2016. What is interesting is that serious competition was noticed for tens of a percent.

Ilmars Rimsevics, Governor of the Bank of Latvia, had previously warned about relaxing too soon after the last crisis. It is too soon to relax, he believes. Although Latvia’s GDP continues to grow, rates are becoming slower in the country and Eurozone. He had warned that the central bank would review its GDP outlook. This promise was kept. This week, the Bank of Latvia announced that its GDP outlook has been reduced from 2.7% to 2.3%.

In its assessment, the bank used poor indexes in Q4 2015. These indexes were related to reduced investments and exports, as well as the decline of VAT in construction and financial services. A slight reduction was also noted in the processing industry. Although the Bank of Latvia had predicted that economic growth would be the slowest of the year, the decline of 0.3%, based on seasonally adjusted data in comparison with the previous quarter, turned out an unpleasant surprise. All of that mainly provided for the reduction of the GDP outlook for 2016.

The central bank’s position on this was not taken well by Economy Minister Arvils Aseradens, who said that reducing the GDP outlook is too soon even considering economic trends in the EU. The Economy Ministry believes there are other indexes that can be used. For example, the situation on the labour market continues to improve and entrepreneurs successfully adapt to new export markets. This is why the ministry does not intend to reduce its GDP outlook of 3.2%.

Finance Ministry predicts GDP growth will be 3% in 2015. This institution prepares its own GDP outlook twice a year – one in the first half of February for the annual Latvia’s Stability Programme that is later submitted to the European Commission and one in June for the development of the next year’s budget.

GDP growth outlook of the European Commission is currently 3.1% and that of IMF is 3.3%.

Reaching zero

The Bank of Latvia had also reduced its inflation outlook to 0%. Previously the central bank had predicted the average annual inflation would be 1.3% in 2016. As noted by the institution, this year’s inflation will be low because of multiple factors. One of them is slower wage growth in comparison with previous years.

Furthermore, it is unlikely 2016 will see a repeat of a rapid price decline on energy resources and food products. Nevertheless, prices on those products continued to decline at the beginning of 2016, which had a major impact on many sectors of the economy.

Inflation is expected to be increased slightly by tax changes, which affect prices of goods and services. Excise tax on fuel increased in January and excise tax on alcoholic drinks is expected to increase from April onwards.

In the negative zone

Even if GDP growth does become positive in spite of negative outlooks and inflation stays within 0%, deposit rates may go into the negative zone. The possibility of such a scenario was suggested by the head of the Baltic SEB Bank branch Riho Unt. According to him, clients of banks have yet to consider having to pay extra for their deposits. Nevertheless, such a possibility is being discussed. Previously, credit institutions served as a buffer zone between central banks and the market, but this cannot continue for long. If banks do not transfer their negative interest rates for deposits on companies, their policy will collapse, believes the banker.

SEB already applies negative interest rates for other financial institutions. Large companies with major deposits may be next, as well as medium and small enterprises.

Up until now, the bank has tried not to apply negative interest rates on private persons. Nevertheless, it is impossible to predict what may come next. In Switzerland, for example, private persons already pay for their bank deposits.

Some good news

In spite of the negative trends in many areas, there was a positive trend in one – birth rates in Latvia. It became known this week that Latvia has established a record in the European Union in regards to birth rates. The fertility coefficient (average number of births per woman) has increased almost 1.5 times over the course of the past 15 years, according to results of the latest Eurostat survey.

The highest fertility coefficient of 2014 was noted in France, where 2.1 births were noted per woman. Next are Ireland (1.94), Sweden (1.88) and the UK (1.81). The poorest demographic policy indexes were found in Greece (1.30), Cyprus (1.31), Spain and Portugal (1.32 in both). In its analysis of birth rates, Eurostat notes that the biggest recent baby-boom took place in Latvia: fertility coefficient was 1.21 in 2001 and 1.65 in 2014.

Ref: 017.109.109.9752


Leave a reply

Following an investment of 3.3 million, K-rauta becomes K Senukai

On Friday, 2 December, Baltics’ largest construction, repair and household goods store network Kesko Senukai opened its first new concept shopping centre K Senukai in Riga, Lucavsalas Street. This venture cost the company EUR 3.3 million.

Saeima deputies allocated record-large amount of money for «friend projects»

The money of Latvia’s budget for next year allocated not with the intention to solve problems in priority industries but rather to satisfy desires of certain politicians and their lobby groups has reached an astonishing new peak – EUR 27.9 million, according to estimates, as reported by Ir.

Income from foreign travellers in Latvia declines

In Q3 2016, Latvia’s current account had a surplus of EUR 93.4 million or 1.5% of GDP, notes Bank of Latvia economist Linda Vecgaile.

airBaltic to sell Boeing 737 after replacing them with Bombardier CS300

Latvian national airBaltic airline intends to gradually update its fleet with Bombardier CS300 aircraft. The airline plans to sell its owned Boeing 737, says Martin Gauss, Chief Executive Officer of airBaltic.

Numbers of active voters in Latvia continue to decline before next year’s elections

47% of Latvian vote-ready citizens plan to take part in next year’s municipal elections, according to results of a survey carried out by SKDS following a request from the Central Election Commission in November.

BATL: transit industry’s potential is enormous, but not used to its fullest

Baltic Association – Transport and Logistics is satisfied that real and constructive work has commenced in cooperation with LDz Logistics and Transport and Communications Institute on Latvia’s transport and logistics, including the development of a strategy for the transit industry.

Ominous milestone: one-millionth Lithuanian to leave soon

The statisticians claim that, every day, 120 Lithuanians hop onto Scandinavia and Western Europe-bound planes in search of a better life. This month, Lithuania is likely to reach an ominous and heart-wrenching milestone with the country‘s émigré number expected to go over one million. To calm down the naysayers, the estimate is unofficial.

Snowy weekends expected in Latvia

The first days of December will go by under influence from a cyclone. Because of that, many regions of the country are expected to experience snowfall. Rain is only expected along the coast. Ice is expected to form as a result and visibility will likely reduce because of snowfall.

Three European cities plan to ban diesel cars

Looking for ways to improve their quality of air, the mayors of Madrid, Paris and Athens have on December 1 expressed readiness to introduce bans on cars and trucks with diesel engines by 2025.

French President Hollande refuses to run for re-election

France’s President François Hollande has unexpectedly announced that he would not run for re-election to the post.

Several hundred Estonian reserve soldiers summoned to unexpected drills

The cabinet of ministers of Estonia ordered on December 1 to hold snap military drills to test the ability of reserve troops to reach combat readiness in 24 hours.

Freight turnover and freight traffic declines at ports

Compared to Q3 2015, the volume of freights carried by land and pipeline transport has decreased by 1.8 million tonnes or 5.5 % in Q3 2016. The most notable drop in the volume of freights carried was recorded in rail transport – of 2.3 million tonnes or 18.9 %.

EU 2017 budget to provide the most support to youth and growth initiatives

In the next year’s budget, members of the European Parliament have secured larger support to unemployed youngsters and Erasmus+, as well as initiatives for support of small and medium-sized businesses, transport infrastructure projects and research. Commitment appropriations for 2017 total EUR 157.8578 billion, and payment appropriations EUR 134.49 billion.

Vejonis picks Kalnins as candidate for NAF commander

President of Latvia Raimonds Vejonis has decided to propose National Armed Forces Joint Staff Chief Leonids Kalnins for the post of commander of Latvia’s National Armed Forces. Kalnins was previously proposed by Defence Minister Raimonds Bergmanis, according to information from LETA.

Europol releases its Christmas calendar of EU’s most wanted criminals

European Union’s police body Europol has engaged in the often commercial pre-festive period by releasing Christmas advent calendar that will reveal one of bloc’s most wanted criminals every day up until Christmas.

Expert: Latvia’s real estate market is sick

In medical terms, Latvia’s real estate market is currently sick. It will only recover once all transactions are carried out using actual market price and those whose expectations are overestimated – drop out, said real estate specialist, member of Latvian Real Estate Association and board member of Real State Jurmala Igors Danilevics.

Prime Minister: Latvia’s economic growth is not as fast as it was expected in 2015

«Looking at national economy’s growth dynamics in 2016, we have noticed drastically different ratings. On the one hand, there are positive statistics that prove Latvia’s economic growth continues. It is not as fast as it was expected in 2015. It is expected that growth will continue in the future. A few days ago opinions of multiple banking experts appeared in the public space, saying that wage growth in Latvia will speed up next year. I would associate that with the government’s decisions and the Saeima’s approved budget for 2017,» – said Prime Minister Maris Kucinskis.

Estonia’s coalition distances itself from charges against ruling party

The coalition partners of Estonia’s Centre Party, which is headed by the Estonian Prime Minister, have this week distanced themselves from charges brought against the ruling party for allegedly receiving illegal political donations.

Finland’s Prime Minister blamed for attempts to limit press freedom

The Prime Minister of Finland Juha Sipilä has denied allegations that he has attempted to affect, how press covers allegations against him and his relatives.

Restrictions for alimony avoiders and other decisions viewed by the Saeima

On Thursday, 1 December, the Saeima will decide on the new Subsistence Guarantee Fund Law. This law states that driving rights can be revoked for alimony avoiders.

OPEC oil exporters agree to reduce oil output to increase price

The Organization of the Petroleum Exporting Countries agreed on November 30 for the first time since 2008 to reduce oil supply in an attempt to make global oil prices grow. The organisatrion’s head Mohammed Bin Saleh Al-Sada stated that a cut of 1.2 million barrels a day would start from January

Tragic dormitory fire in Turkey

Police in southern Turkey has detained six people after 11 pupils and a teacher died in a dorm fire.

Tick encephalitis infection cases increased by one-third in Latvia this year

Cold November forced ticks to enter hibernation. There is reason to believe tick activity in Latvia has ended for this year, admits entomologist Voldemars Spungis.

PHOTO: world’s first Bombardier CS300 aircraft arrives in Riga

On Wednesday, 30 November, Latvian airBaltic airline welcomed the world’s first Bombardier CS300 aircraft in Riga.

Retail trade turnover in Latvia up 0.2%

Compared to October 2015, total retail trade turnover rose by 0.2 % in October 2016. Turnover of retail trade in food products decreased by 2.7 %, whereas the turnover of retail trade in non-food products increased by 2.0 %.

Newest comments