Latviski English По-русски
Saturday 22.10.2016 | Name days: Irīda, Īrisa

Economic Diary of Latvia. Potholes on a flat road

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe year of the Fire Monkey promises many surprises for Latvia’s economy. There may even be a couple of shocks in store for the country. In any case, this is one of the possible conclusions one can come to from predictions made by well-known investors, economists and international organizations.

George Soros, American financial guru, made quite a shocking prediction on the first week of January. During his speech at an economic forum in Sri-Lanka, he compared the current situation on global financial markets to that of 2008, when the last global financial crisis began. According to Soros, the global economy is currently heavily affected by China’s attempts to find a new growth model. The billionaire believes China has serious problems with its reformation strategy. In addition, yuan exchange rate continues to decline, which in turn affects global financial markets. Return to positive interest rates has also become a problem for developing countries, said Soros.

Senior researcher at the Cato Institute, Richard W. Rahn, believes the world will face a new financial crisis this year. According to him, growth of the global economy will be lower than what was stated in the latest IMF report because the ratio of public debt to GDP in the world is currently at a record level, which means slower economic development rates.

In USA, this ratio is equal to 98% of GDP, in Eurozone it is 104% and in Japan – 220%. Any serious destabilization of the world economy can easily throw the world back into recession, said the expert.

Latvia: nice spot we have here

Looking at the possibility of a new financial crisis from the perspective of state debt, Latvia has a chance of avoiding any major shocks. According to information from the State Treasury published this week, Latvia’s debt pales in comparison with that of other countries. Latvia’s debt was equal to 34% of GDP (EUR 8.4 billion) at the end of 2015. By the end of 2016, it will have reached 40% of GDP (EUR 10.1 billion). As explained by the State Treasury, the increase of the state debt is tied to the need to reduce obligations issued in the form of bonds in US dollars: February 2017 marks the deadline for paying back USD 1 billion. Money will be required to cover loans and budget deficit.

Nevertheless, Latvia’s debt remains rather modest. Thanks to low budget deficit indexes, Fitch retains Latvia’s index at ‘A-‘. The agency also highly praised the rate of economic development in Latvia, which, according to predictions, will likely stay at 3% in the next couple of years.

Eurozone: just a little bit more

According to the outlook of the World Bank published this week, Eurozone’s economy will likely grow from 1.5% to 1.7% in 2016. Even though it seems modest, it will be the highest growth rate since 2010. Measures that have been holding back the region’s recovery for the past several years (like strict austerity) are slowly weakening. Available loans are stimulated by expenditure, fiscal consolidation is practically complete and the monetary policy is as friendly as it can be.

At the same time, low prices on raw materials increase overall purchasing power, which contributes to the increase of consumption by households. To help the recovery process gain momentum, enterprises should do the same, because investment expenditure currently stays 15% below the pre-crisis level. Trust in economic development will grow in the corporate sector. More accessible loans mean investment growth rates will exceed GDP growth in the coming years.

Russia: recession continues

As for the Russian Federation, low oil prices and international sanctions, according to experts of the World Bank, will not allow this country to hope for positive developments and growing investments. Experts of the bank predict a decline of 0.7% for Russia’s economy in 2016. Recession in this country could be replaced with growth no sooner than 2017 or 2018. Russia’s GDP is expected to grow by 1.3% in 2017, according to experts. With that, recovery of economic growth rates in Russia will continue in 2018.

Nevertheless, the World Bank is not very optimistic about perspectives in global economy as well. Specialists of the bank have corrected global GDP outlook to a negative one, reducing it to 0.4%. With that, global GDP should grow by 2.9% in 2016. Global economy and especially developing economies may run over a very big pothole, believes the bank’s chief economist Kaushik Basu.


Leave a reply

Four teachers in Latvia are paid wages that exceed EUR 2,000

In September 2016, the biggest teacher’s salary paid in Latvia with bonuses was EUR 2,260.27, as LETA was informed by Education and Science Ministry.

Producer price level down 1.6% in Latvia’s industry

Compared to August, the level of producer prices in Latvian industry increased by 0.3% in September 2016.

SRS Tax Debt Enforcement Office director Cerneckis steps down

On Friday, 21 October, director of Latvian State Revenue Service’s Tax Debt Enforcement Office Kaspars Cerneckis submitted his resignation.

Bookmakers predict Sadurskis’ remainder in his post for the rest of the year

Latvian Education Minister Karlis Sadurskis has been forced to distance himself from political opponents and teacher trade unions because of criticisms regarding reduced wages caused by the teachers’ pay reform. Nevertheless, political support will keep the minister in his post, bookmakers believe.

Lithuanian military discussing deployment of long-range missiles

A senior Lithuanian military officer has on October 20 stated that Lithuania is considering the deployment of long-range missiles in the country in the framework of hosting a multinational NATO battalion in 2017.

Ukraine in joint declaration with Lithuania, Poland condemns WWII aggressors

The Vekhovna Rada of Ukraine has this week adopted a joint declaration with Lithuania and Poland attaching responsibility for World War II to Germany, the USSR and the international community’s «appeasement policy».

Saeima Budget Committee conceptually approves 2017 budget project

On Thursday, 20 October, Saeima’s Budget and Finance Committee supported the state budget project for 2017, the medium-term budget contents for 2017, 2018 and 2019 and 57 legal drafts associated with the project.

Facebook sorry for removing breast cancer informative video

Facbook has expressed apologies for the removal of a breast cancer informative video shared on the social network by a Swedish foundation.

Two of the last twenty three first refugees have left Latvia

The last two of the first twenty three refugees resettled in Latvia have left for Germany, as reported by LTV.

Pregnant woman in Italy dies after doctor allegedly refused to perform abortion

Police in predominantly Catholic Italy is investigating a case of a woman pregnant with twins dying after miscarriage.

Russia applies discount on transit from Belarus

Russian Railways has applied a 25% discount on petrol, diesel fuel and crude cargo transports from oil processing plants in Belarus to Russia’s north-west ports. With that, Russia has basically provided Belarus with tariffs equal to tariffs in Baltics.

The first container train headed for Riga departs from China

On Thursday, 20 October, Latvian Transport Minister Uldis Augulis, representatives from LDz and YXE International Container Train, multiple Chinese officials and Latvia’s ambassador in China Maris Selga saw off the first test container train from China to Riga.

Customs officials intercept hashish shipment worth EUR 2 million

Latvian State Revenue Service’s Customs Police intercepted and confiscated a shipment of more than 200 kg of hashish worth EUR 2 million, as journalists were informed by SRS Customs Police Director Kaspars Podins on Thursday, 20 October.

SA: Riga Freeport has only realized one of five of our recommendations

Latvian State Audit follows the development of the largest investment projects especially carefully, because the state does not seem to handle them all that well. Krievu Island project is one of the largest investment projects, because there is European Union finances invested in it...

Job seekers in Lithuania want Western salaries, employers dumbstruck

Although Lithuanian labour market is in desperate for workforce, but those willing to toil will nod to a job offer only if the pay is really big. So big that the country‘s hirers feel like grabbing their heads upon hearing the candidates‘ salary expectations.

Overall government budget decreased in 2015

In 2015, the general government budget deficit amounted to EUR 309.0 million or 1.3% of the gross domestic product, whereas the general government consolidated gross debt amounted to EUR 8 846.3 million or 36.3% of the GDP.

SP: claims about Motorola’s murderer are an attempt to show Latvia as the enemy

Latvian Security Police views claims that Donetsk military commander Arseny Pavlov, aka Motorola, was allegedly killed by a hired killer from Latvia named Marks Ozolins is nothing more than yet another attempt at information war aimed to demonstrate Latvia and its citizens and enemies.

Estonian President Kaljulaid not to ask state to pay rent

Estonia’s new President Kersti Kaljulaid will not ask the state to pay rent for using her home unlike the former head of state Toomas Hendrik Ilves did.

Every third coin with Milda’s image has made its way to Europe

Every third euro coin with Milda’s image has found its way to Europe. The proportion of those coins in Latvia is 71% of all euro coins in circulation, according to monitoring data compiled by Citadele Bank’s CBL Cash Logistics service.

Estonia plans to increase female proportion in military

Estonia has announced plans to triple female involvement in the country’s Defence Forces and to expand the list of units accessible to woman soldiers by 2018.

Pre-paid mobile card users to be registered as part of a plan to reduce grey economy

At the meeting of state secretaries on 20 October, a proposal was presented from the transport ministry to begin registration of mobile pre-paid card users.

Next year’s budget plan and other decisions viewed by Saeima this week

On Thursday, 20 October, the Saeima will gather for an extraordinary meeting, during which deputies will discuss the next year’s budget plan and 57 associated legal drafts.

European Space Agency attempts to re-connect to its Mars probe

The European Space Agency has lost contact with its Mars probe on October 19 shortly prior to its planned landing on the planet.

Klauss withdraws from SRS personnel selection process

Kristaps Klauss, executive directors of Latvian Forest Industry Federation, has decided to withdraw from State Revenue Service’s personnel selection process.

Lembergs to continue testifying in court at the end of October

Aivars Lembergs, who is accused of serious crimes, will continue testifying in his own criminal case on 31 October, as confirmed by Riga Regional Court’s press-secretary Raimonds Locmelis.