bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Tuesday 17.01.2017 | Name days: Tenis, Dravis
LatviaLatvia

Economists: Latvian households can afford to spend more money

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe global economy continues growing. In addition, the role of developed economies becomes bigger as well. It is good news for Latvian exporters, because the new export markets are well-known and predictable for them. Interest rates do not become smaller, but they will remain low for a long time, so now is the best time for companies to invest, as concluded in the latest Swedbank economic outlook.

Global economic growth will be weaker than expected in 2015. It will be mostly affected by short-term weakness of the economy in the United States of America at the beginning of the year. It is expected that global economic growth will become stronger in 2016 and 2017. There are good conditions for a more rapid economic growth in USA the situation on the labour market is slowly improving, the level of optimism exhibited by consumers and companies is good and promises growth in consumption and investment activity. Even in Eurozone the largest fiscal consolidation measures are over and monetary stimulation activities are becoming wider. The situation in Nordic countries varies – growth in Sweden and Denmark is becoming stronger. Norway, on the other hand, is affected by a rapid decline of oil prices. Events in Russia are currently slowing Finland’s economic growth. The largest concerns apply to developing markets – the decline in Brazil’s economy is not expected to end soon. Large risks remain in China and India. Russia’s economic recession is becoming deeper and its very weak growth could appear in the middle of 2016. The upcoming interest rate increase by the U.S. Federal Reserve will strengthen the U.S. dollar, which, in conjunction with China’s recent devaluation could negatively affect already unstable balances of developing markets, as mentioned in the outlook.

A truly hot summer continues in Greece – the country has seen a dead end in talks with creditors, a crisis in its banking sector and capital control, a referendum and default against IMF. The agreement on the next bailout plan was nonetheless achieved, debts were paid, new loans accepted. And now the country faces new elections. This story will not end soon. Any possible outcome provides for the write-off of some of Greece’s debts – it is the cost for geopolitical safety in EU’s south. A drama, but only for Greece – financial markets see it more and more as an isolated case. It is not expected that problems of this country will affect economic growth in Eurozone, experts say.

Swedbank economists increase Latvia’s GDP growth forecast for 2015 from 1.9% to 2.1%. This is because of a surprisingly strong second quarter of the year. It seems growth in the first half of the year was also more rapid than expected, because exports and investments were more powerful and capable of compensating more careful rise of households’ consumption rates. Growth may yet decline in the second half of the year because of weak external demand and possible obstacles from Russia in regard to railway cargo transport, economists say.

Economic growth is expected to be more rapid in 2016 and 2017. It seems that 3% is Latvia’s new reality – without massive structural reforms and/or much higher external demand, the country can forget about sustainable 4-5% growth. It is expected that because of global economic and European growth, export and investment growth will become more rapid and secure. Household consumption growth will remain relative strong – more cautious this year and somewhat stronger in 2016-2017. At the same time, it is worth mentioning that economic growth may be even slower – the main risks are external (Russia and Eurozone), economists say.

Up until now, exporters have been exceeding expectations by successfully reorienting their activities from crumbling CIS markets to others. However, development is uneven and fluctuating among industries. More capable growth in developed countries is good news, because these markets are familiar to Latvian entrepreneurs and relatively predictable. Households’ demand growth in Latvia is relatively stable. It is important to consider political risks in Russia.

Considering the expected rise in demand, currently low interest rates and high workload in many industries it is time to invest. New loan services are on a rise, and this activity is expected to become even more active. If companies do not invest now, their European competitors will end up in the lead, because investment and loan activity there is already on a rise. Considering rising labour costs and the declining number of residents of working age, investments in machinery and digital solutions are necessary to reduce dependence on labour force. Investments to increase capacity as just as important. Otherwise it will be much harder and more complicated to expand export volumes, Swedbank experts add.

Income of households continues to grow, mostly because of rising wages. It is expected that average wages will grow around 6% annually. Swedbank economists predict PIT will not be reduced in 2016, and minimum wages will be increased only by EUR 20. Creation of new jobs will be slow. Decline of prices for raw materials and its influence on prices of fuel, gas, heating energy and food products will maintain price rise at an insignificant (0.5% on average) level and a moderate 2% in 2016 and 2.3% in 2017. Prices of certain services may grow slightly faster.

In general, households can afford to spend more money. Deposits have grown. Households now more often pay back current loans than take on new debts. Low interest rates are beneficial for loan takers.

As for what all this could mean for the government, economists say State Revenue Service’s administered tax revenue has grown by 5%. Finance Ministry finally admits that revenue will be lower than expected and budget deficit will be higher than the amount stated in 2015 Budget Law – economists had previously warned about this. This means negative fiscal space in 2016. It is likely PIT will not be reduced next year; tax increase will be lower and shadow economy combating measures will continue as well. But there is no need to over-dramatize the situation. There is a lot of space for manoeuvring there. However, it is worth mentioning yet again that without a far-sighted and brave strategy for either reducing or increasing income, the government will continue facing regular shortage of funds for its priorities, experts say.

Ref: 102.109.109.5793


Leave a reply

Rating: Estonia best in Baltic in growing and retaining talent

In a rating on the success of countries in growing, attracting and retaining talented workers, Baltic states have all been ranked in the top 33 out of 100 countries.

FM: gradual transfer to electronic procurements is planned

«The procurement field has changed significantly over the past several years. And it is not just because of the new directive announced by the European Parliament and European Council for procurements. One other factor to consider is the aiming for better management, reduction of the administrative burden and more efficient use of public resources,» – reports Finance Ministry’s Legal Department expert Liga Neilande.

Adding more EUR 10m Rail Baltic stops up for analysis, says Ratas

The current project of the international high-speed railway Rail Baltica contains three stops in its Estonian part, while adding more would need careful analysis, stated Estonian Prime Minister Jüri Ratas.

Okmanis: stores should become modern to survive

Competition in the trade sector continues to grow in Latvia, admits Raimonds Okmanis, chairman of Latvian Traders Association.

Survey: every third Ventspils resident worried about new jobs in the city

Continuing the discussion regarding the unemployment situation in Ventspils, Latvijas fakti had performed a social survey last year. Results of this study show that 32% of residents of this city are concerned about the emergence of new jobs, adding that this is one of the main priorities for the city council.

Indian Ocean’s search for missing Malaysian aircraft – stopped fruitless

Search teams have quit looking for Malaysian airliner, which disappeared from radars on flight No. MH370 from Malaysia to China with 239 people on board, as currently, only seven of the 20 pieces of recovered debris have been identified as definitely or highly likely to be from the Boeing 777.

Turkey’s New Year attack suspect arrested

Police in Turkey have captured the man suspected of having committed a tragic terror attack in Istanbul on January 1.

Media report on Lithuania’s plan to build fence along Kaliningrad border

Vilnius has voiced plans to erect a 45-kilometre-long fence on the Lithuanian-Russian border along the Kaliningrad region, report Russian media.

Noord Natie Ventspils Terminals to offer alternative option for cargo carriers

Noord Natie Ventspils Terminals multifunctional cargo transshipment centre continues its work this year on a wave of positive results. This year, the terminal plans to introduce a new transport line to offer existing carriers and increase cargo turnover.

African swine fever reaches Krimulda and Adazi

On Monday, 16 January, Crisis Management Council decided to declare a state of emergency in Krimulda and Adazi. Because of that, it will be necessary to allocate approximately EUR 100,000 from the state budget for emergencies to combat African swine fever.

Ventspils has the most expensive heating among Latvia’s major cities

The heating season is especially unpleasant for residents of Ventspils, as, according to data from the Public Utilities Commission, Ventspils has the highest heating tariffs among Latvia’s major cities. Heating tariffs are only higher in a couple of smaller cities, but even in most of Latgale tariffs are lower than in Latvia’s richest port city.

VIDEO: how is life for «martyr» Lembergs?

A video has surfaced on the internet, depicting from bird's eye view the home of criminally accused, oligarch and member of Ventspils City Council Aivars Lembergs.

Investment volume in Latvia’s real estate market exceeds EUR 300 million

The volume of investments in Latvia’s real estate market exceeds EUR 300 million for the fourth consecutive year. The total investment volume reached EUR 341.3 million in 2016, compared with EUR 394.4 million in 2015, according to data from Colliers International Latvia.

Calendar of cultural events in Lithuania. International museum selfie day in Kaunas

BNN offers you a selection of cultural and sports events in Lithuania for the week during January 16-23.

Hesburger plans to open nine new restaurants in Baltics

Sales of Finnish and Baltic fast food restaurant network Hesburger in Baltics reached EUR 58 million last year.

Nordea: Latvia is the most demanding among Baltics in terms of bank supervision

Of the three Baltic States, Latvia is the most demanding when it comes to regulator requirements for banks. This is largely because of its banking market’s state. Nevertheless, requirements are not inadequate, Nordea bank head in Latvia Janis Buks said in an interview.

Estonia registers increase in population

The number of Estonian population has last year grown by 0.14%, or 1,850, people – estimated Statistics Estonia.

Lembergs had a shared offshore business with Putin’s advisor

In 1994, Ventspils Mayor Aivars Lembergs travelled to Moscow to sign a document that made him a co-owner of Solvolub offshore. The company’s largest co-owner was Russian businessman Boris Titov, who is currently one of Russian President Vladimir Putin’s advisers. This is also how Lembergs first acquired shares in Ventamonjaks in Ventspils, as reported by Nekā personīga programme of TV3.

Finland testing paying basic income to unemployed

2,000 Finns have been selected for a government social benefit test scheme to provide unemployed people with a basic income of 560 euros for up to two years.

Thaw expected in Latvia this week; ice may yet form in many places regardless

Atmospheric pressure will rise in the first days of the week. Clouds will appear from time to time, however, bringing snow and wet snow, as reported by State Environmental, Geology and Meteorology Centre.

Train row prompts Serbia to voice military threat to Kosovo

Belgrade has voiced a warning expressing readiness to protect the territory it considers belonging to Serbia in its neighbouring country Kosovo. Serbian President Tomislav Nikolić accused Kosovo of seeking a war, after a passenger train painted in Serbian colours and the words «Kosovo is Serbia» was prevented from crossing the Kosovan border.

Week in Lithuania. Landsbergis suggests inviting Russian MPs

Vytautas Landsbergis, Lithuania‘s first post -independence leader, has suggested inviting Russian parliamentarians to memorial events of January 13 coup. In his words, inviting Duma deputies would be a logical and humane step.

Lithuanian President set to root out «eternal» state company CEOs

«Eternal» heads of state and municipal companies, who’ve been at the helm for years and years, must go, insists Lithuanian President Dalia Grybauskaitė.

Vejonis asks Reizniece-Ozola to address envelope wage problem more seriously

«We need a tax policy that will reduce social inequality of our country’s residents, stimulate formation of businesses and enhance society’s trust in state administration,» – said Latvian President Raimonds Vejonis during his meeting with Finance Minister Dana Reizniece-Ozola.

Sproge replaces Truksnis as Mayor of Jurmala

Following Gatis Truksnis' decision to step down his post as Mayor of Jurmala was taken by Riga Sproge on the same day.