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Monday 18.12.2017 | Name days: Klinta, Kristaps, Kristofers, Krists

Economist: budget development is a major risk for future economic growth

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The development of the next year’s budget is a great risk to further economic growth, considers Swedbank chief economist Dainis Stikuts.

«If the state budget is adopted in correspondence with the planned than there is a possibility that already next year the credit rating of the country is transferred to investment grade. This will enhance the entrance of external investments, as well as to rise the companies’ flexibility, for example, reducing the need for a pre-payment or credit interest rates,» Stikuts informed LETA.

On the other hand, labour market is also threatening the economic growth. According to the expert there is a possibility, that alongside with the increase in skills that are not demanded by the market, the salary rate is to grow too rapidly decreasing Latvia’s competitiveness.

There is another risk of emergence of two-speed society, which means that life improves to those who are employed, whereas life standard does not change for the unemployed. This would result in increased inequality, social risks, emigration, and endanger to the pension system sustainability.

He reminds that mostly export sectors have developed this year, namely, manufacturing, especially wood and its articles manufacture and agriculture.

«Manufacturing industry was able to benefit from the rapid recovery in Europe, it also managed to find new markets. Whereas the domestic-oriented sectors experienced  a fall, especially, in construction, whose recovery can be expected only when there is a considerable increase in investments,» states the expert.

The Prime Minister Valdis Dombrovskis has pointed out that the amount of next year’s budget consolidation will form 350-395 million lats, while the Minister for Finance Einars Repse (Einars Repše) forecasts that the consolidation will not be less than 350 million lats.


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