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Friday 23.02.2018 | Name days: Haralds, Almants
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Economic Diary of Latvia. The Great Baltic Wall

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUWhile people were enjoying Easter, Latvia’s Border Guard remained on alert. Moreover – it turns out the first three kilometres of the fence on the border with Russia have been constructed. This fence is intended to help authorities combat illegal migration.

The first section of the fence (2.7 m high) has been set up on the territory managed by Ledzene border checkpoint, as confirmed by State Border Guard representative Evgenija Poznak. Ludzene borders with Pskov Oblast of the Russian Federation and Vitebsk Oblast of the Republic of Belarus.

The total distance planned to cover with the fence, which will cost the state approximately EUR 17 million, is nearly 90 km. It is planned to set up 24 km of the fence in 2016. Surveillance cameras and motion sensors will be set up there as well.

Previously, Interior Minister Rihards Kozlovskis had mentioned that nearly EUR 80 million would be necessary to establish a fence on the border with Russia and further enhance the work of Latvia’s border guard by the year 2020.

The total length of the fence is planned at 280 km.

Estonian authorities have announced their own plans to establish a fence on the border with Russia, as well. The height of their fence will be 2.5 m. The border line will have a patrol trail at least 2 m in width and a control line up to 8 m in width. Other border equipment – animal fences, barriers, pillars, warning signs and lighting – will be set up there as well, as confirmed by Estonian Interior Minister Hanno Pevkur.

Merges and acquisition

This week, a report was published on the situation on the acquisition market prepared by Mergermarket and Raidla Ellex. As it turns out, Latvia is in the lead in this market segment among other Baltic States. This is largely thanks to many large deals in the energy, transport and production industries. In total, merges and acquisitions in Latvia formed 76% of all transactions in the Baltic region. Swiss Euromin S.A. acquired Ventspils nafte for EUR 199 million; Ukrainian KVV Group acquired KVV Liepajas Metalurgs JSC for EUR 107 million; Estonian Graanul Invest acquired Latgran from Swedish Billerud Korsnas AB for EUR 104 million. These are the largest acquisitions, according to information from Mergermarket, that took place in the Baltic region in 2015.

In terms of the number of deals in each country, results are as follows: 44% of all deals were carried out in Lithuania, 30% in Latvia and 26% – in Estonia.

According to Mergermarket, it is possible there may be more big M&A deals in the technological sector, media and telecommunications this year.

Deposits are going for a record

The total volume of deposits of local enterprises and residents reached a new height in February – EUR 10.5 billion, as reported by Bank of Latvia economist Vilnis Purvins on makroekonomika.lv.

The lion’s share of the increase of deposits was provided by the increase in balance on accounts of non-finance enterprises. Increase of deposits of households was moderate.

The volume of deposits attracted by banks had increased 2.7% in February. Their annual growth rate was 11.9%. Deposits of enterprises had increased 5.1% in one month and 18.8% in a year. Deposits of households had increased 0.7% and 6.4% respectively.

Balance of loans provided by banks to local enterprises and households had decreased by 0.1% in February, including 0.1% for non-finance enterprises and 0.2% for households. The Annual reduction of the volume of interior loans was 0.4 percentage points – to -1.9% (-2.2% for non-finance enterprises and -4% for households).

As noted by Purvins, it is expected that similar tendencies will be noted in the future. Development of lending services and deposits for households may turn out rather moderate.

OECD warns

The latest outlook on Latvia’s labour market and social policy was presented by Organisation for Economic Co-operation and Development this week. During the document’s preparation process, OECD experts visited ministries and other state and municipal offices, regions, companies and social services in Latvia.

The main conclusion – Latvia still has a lot of work to do to improve the situation in the country. Otherwise there is a risk that labour efficiency and influx of investments will remain below their potential and social inequality will continue to grow. As mentioned in the document, major economic development in the past 20 years has reduced the difference in income and productivity between Latvia and OECD member states. In spite of this, Latvian residents are not satisfied with life; many choose to emigrate.

According to experts, the current complicated economic situation and major difference in income require a more effective social policy to resolve.

Experts of the organization note that Latvia’s population has declined 25% over the past 25 years. 16% of those Latvians plan to return to their homeland within the next five years. This means that most emigrants do not plan to return.

OECD specialists note that one major motivational tool is wage. This is why it is worth thinking about not only the increase of labour productivity but also labour remuneration.

It is also highly important to find a solution to the problem of getting long-term unemployed people back to the labour market.

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