Latviski English По-русски
Monday 20.11.2017 | Name days: Anda, Andīna

Economists: Latvia’s economic growth is becoming slower

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUEconomic growth has become slower in Latvia. It has become stronger and more balanced, however.

The external environment will remain relatively weak, but it will recover bit by bit. No significant changes are expected to come after Saeima elections. Even reforms are not expected to impact things all that much, believes Swedbank economists Mārtiņš Kazāks and Lija Strašuna.

According to them, differences in development rates of economies are becoming clearer. For example, USA’s economy continues its stable growth. Eurozone’s recovery, on the other hand, is becoming slower even in spite of aggressive stimulations from the European Central Bank.

Germany plays an important role in Eurozone. Internal consumption in Germany has declined recently. Economists believe there have to be fiscal policy stimulations in order to improve economic growth in the future. However, there are concerns over politicians’ ability to reach an agreement in regard to such solutions.

India has good conditions for strong market development. China’s economic growth will likely slow down. Brazil is facing enormous economic challenges and Russia’s economy is slowed by chronic structural and institutional problems, low oil prices and sanctions. Russia’s economy will likely remain weak in a long-term and short-term perspective.

‘Russia’s economy did not drown in recession earlier this year because imports had rapidly declined. Household consumption is very weak and it will likely start to decline in the near future, because the growing inflation reduces residents’ purchasing power. Investment has begun to decline even before the Russian-Ukrainian conflict, and will continue to do so in the near future, because funding is becoming scares and expensive. It is likely that Russia will descend into a recession. Very slow economic growth may return at the end of 2015 or 2016,’ – said Kazāks.

Economists have slightly reduced the outlook for the base scenario of 2015-2016. This is mainly because of Eurozone’s weak economy. The negative scenario has a 25% probability (escalation of the conflict in Ukraine, deflation risks in Eurozone, repeated fluctuations in the finance sector). If ECB provides a more powerful and effective scenario, there may be a more positive scenario.

‘There may be relatively slow economic growth, which could rise thanks to gradual economic growth of Latvia’s trade partners and stabilization of the Russian-Ukrainian conflict. Even though household consumption is likely to serve as the main engine this year, economic growth will gradually become more balanced. Negative risks remain higher than the possibility of a positive scenario,’ – says Strašuna.

Latvia’s export volumes have been good this year. This is in spite of slower development of Eurozone and low demand coming from Russia. However, considering low inflation environment (lower raw product prices and Russian embargo), it is now more complicated to increased export value. Exports to Russia are on a decline. This, however, is compensated by growth on other markets (UK, Poland, Sweden, Turkey and Hungary). It is expected that exports to European countries will continue growing relatively quickly. Liepājas Metalurgs plans to restore functionality again before the end of 2014. This could potentially increase export volumes by at least 1-1.5 percentage points. Export growth outlook is not reduced for next year in spite of expected economic decline in Eurozone.

Considering all geopolitical risks, entrepreneurs have become cautious in their investment plans. It is expected, however, that investment activity will improve closer to the end of 2015 and beginning of 2016.

It is expected that salaries will continue to grow, but slower than they did in the first half of 2014. Growth of average wages may reach 4.5% next year and 5.5% in 2016. The number of employed persons is not expected to change much. Creation of new jobs is expected to become more active in 2016. The proportion of employed persons will mainly reduce because of emigration and negative demographic trends. The proportion of vacancies grows slowly, with that there are no massive balance fluctuations on the labour market that could potentially motivate a rapid wage growth. Growth of production efficient remains slow and if the gap between wage and production does not reduce, there could be competition problems in the future.


Leave a reply

European Parliament triggers punitive procedure against Poland

Members of the European Parliament have passed a resolution requesting for the application of the so-called «nuclear option» for Poland, Article 7 of the EU Treaty, because of the threat to the rule of law in the biggest Eastern European country.

BNN summary of the week: medicinal cannabis in Lithuania, cargo anti-record, and Lemberg’s dwindling influence in UGF

BNN offers a summary of this week’s topical news in a variety of categories: Fight; Growth; Truth; Future and Opinion.

NAF: Russia’s attitude remains unfriendly towards Latvia

So far Russia’s demonstrated attitude has remained unfriendly towards Latvia, said Commander of Latvian Armed Forces Leonīds Kalniņš in an interview to LNT.

Lembergs’ turn to testify before parliamentary committee has come

Aivars Lembergs, who is accused of serious crimes and is suspended from performing duties as chairman of Ventspils City Council, has been invited to come to a meeting of the Saeima’s Investigative Committee and answer questions associated with so-called oligarchs case.

How Latvian communities around the world plan to celebrate Latvia’s birthday?

«Celebration of independence of the Republic of Latvia is an important tradition that allows members of Latvia’s diaspora to maintain ties with their homeland – this year’s event will be even more expansive and inclusive than ever before. This is because events associated with the country’s hundredth birthday will be organized all around the world,» says manager of World Federation of Free Latvians office in Latvia Jānis Andersons.

European Parliament triggers punitive procedure against Poland

Members of the European Parliament have passed a resolution requesting for the application of the so-called «nuclear option» for Poland, Article 7 of the EU Treaty, because of the threat to the rule of law in the biggest Eastern European country.

Wage rules violations most often associated with envelope wages

To promote public awareness and improve commercial environment, honest competition and honest compliance with taxes, Latvia’s State Revenue Service intends to expand its database with new information about taxpayers, BNN was told by SRS.

Management of Unity’s Saeima faction to change in December

«Political consultations with all of Unity’s partner parties that are represented in the Saeima’s faction have concluded. An agreement has been reached to perform management change before the end of Saeima’s autumn session – around 21 December,» says Unity’s chairman Arvils Ašeradens.

EP prepared to commence talks with EU governments on reforming asylum system

The European Parliament is prepared to commence talks about reforming Dublin Regulation to ensure every member state is able to resettle a portion of asylum seekers.

Estonia to pour into Finnish-Estonian cultural fund 700 000 euros

Estonian cabinet of ministers has decided to attribute 700,000 euros to the Finno-Estonian Cultural Fund, an organisation working since 2015 aimed at fostering cooperation between the two states in culture, creative economy and training both for individuals and organizations.

Russia in UN vetoes extension of Syrian chemical attack investigation

At the UN Security Council, Russia has used its veto powers to block a resolution with which it would be allowed to continue the international investigation into a chemical attack this spring in Syria, which prompted the U.S. to launch missile strikes on a Syrian airbase.

Latvia’s birthday expected to be windy

A precipitation zone will reach Latvia from the west on Friday, 17 November. The precipitation zone will, however, pass over Latvia quickly, making rainfall short and periods of clear sky more frequent and longer. Air temperature is expected to stay within +5° C… +8° C, as reported by State Environment, Geology and Meteorology Centre.

State of emergency in force in flood-hit Greece

Rescue services in Greece are looking for no less than five people, who have gone missing following unexpected and disastrous floods on Wednesday, November 15, that killed 15 people; however, bad weather is still expected.

Laupīšanas 101 director: Latvia’s film industry has yet to reach its potential height

There is sufficient evidence to prove that Latvia’s film industry is capable, but at the same time many films are directed basically the same way. There is a lack of creativity, which means very slow development for the industry, said Kaspars Marhlevičs, director of short comedy Laupīšanas 101, in an interview to BNN.

Medical cannabis bill paves way in Lithuanian legislature

Otherwise conservative Lithuania has made a big stride forward legalising cannabis for medical use with 92 Lithuanian parliamentarians voting Thursday, November 15, to open the bill draft on medication containing cannabis. The law draft should go back to the parliamentary floor for deliberations on December 12.

Latvian sentenced to ten years in prison for fighting on the side of ISIS in Syria

On Thursday, 16 November, Latvian citizen Mārtiņš Grīnbergs was sentenced by Riga Regional Court to ten years and three months in prison for fighting on the side of Islamic State terrorist organization.

European Parliament: Africa’s development requires a new stimulus

To resolve economic, social and migration-related problems, which usually accompany lasting crises, better African-EU cooperation is needed, European Parliament members say.

Latvian Chamber for Commerce and Industry proposes preventing new MPC reforms

Increase of mandatory procurement components cannot be allowed. Exactly the opposite – this cost should be dropped entirely for end electricity prices in an attempt to improve international competitiveness of companies, BNN was told by council members of Latvian Chamber for Commerce and Industry.

Matīss: LDz cannot raise tariffs and perform rail electrification under cargo anti-record

Because Latvijas dzelzceļš has set an anti-record in cargo transports in the first ten months of this year, Saeima deputy and member of the National Economy Committee Anrijs Matīss says raising the fee for the use of infrastructure cannot be allowed. He adds that the intended railway electrification project should be considered very carefully.

Lithuania and Latvia placed in top 10 in climate policy index

In the annual Climate Change Performance Index, where climate policy action in 57 countries has been evaluated, on a scale from «very high» to «very low», 11 EU member states have been evaluated with as having been highly active, with Sweden showing the best results ahead of Lithuania, the UK, Finland and Latvia.

Bite Latvija buys Stream Networks and Latnet

Mobile commutations operator Bite Latvija has signed a purchase agreement for 100% of shares of Stream Networks and its subsidiary Latner Serviss, as BNN was informed by Bite manager in Latvia Kaspars Buls.

airBaltic carried three million passengers in first ten months of 2017

In the first ten months of 2017, airBaltic carried a total of 3,007,034 passengers to destinations in Europe, Scandinavia, Russia, CIS and the Middle East, BNN was told by the company.

Kaljulaid sees African opportunities to outplace EU in digitalisation

During a visit to Ethiopia, Estonian President Kersti Kaljulaid has discussed African-EU relations with the African Commissioner for Trade and Industry and recommended investing into digital development that would be beneficial for the continent itself.

Most employed people in Latvia are satisfied with their jobs

More and more often employers experience lack of qualified labour force, as well as increase of employees’ confidence about their competitiveness on the labour market and their openness for better job offers.

Estonian railways operator happy about increasing freight volume

Freight carried on the infrastructure of the Estonian state railway company Estonian Railways in October amounted to one million tons, which is a 10.4% hike compared to October 2016.