Latvia will need to take into account the uncertainty whether or not Eurozone’s and global economy remains high in the nearest future. The government should not rush increasing budget expenses. Instead, the government should be careful in its assessment of financial abilities of Latvian households, BNN interviewed bank economists note.
The latest global economy indicators are evidence of growth. The economic drop in the Eurozone could prove to be somewhat deeper than anticipated. Economy of the United States of America could retain growth just beneath its potential, but it will still be dependent on the general events in the world – first of all in the Eurozone. Meanwhile, notable signs of growth can be seen in Asia and Latin America, says SEB Bank economist Dainis Gaspuitis.
«It means that Latvia’s economy, being affected by this tendency, will slow its growth tendencies. Given the predictions, the government should not rush increasing budget expenses. What should be noted, which should be reasonably clear as it is, which priorities receive additional expenses will remain in the competence of the government to decide. All necessary measures for overcoming the crisis are long-term. There is no miracle medicine. Nevertheless, given the situation, all possible powers need to be mobilized to contribute to Latvia’s economic growth,»- says Gaspuitis.
Senior economist of Nordea Bank Andris Strazds warns that the uncertainty within global economy will still be high throughout the years to come. «One of the few ways to cope with it, is for the government to keep a certain amount of emergency funds so that the country would not be dependent of short-term finance market fluctuations. Latvia’s government has been doing just that since the beginning of the economic crisis,»- says the expert.
DNB Bank economy expert Peteris Strautins, on the other hand, notes that experience of the last five years of the global financial crisis has shown that significant events cannot be predicted. «Nevertheless, we know with a large probability that demand on foreign markets will grow slowly this year and in the years to come. There is a notable growth potential on the local market, with the process of company and household debts decrease coming to an end. With that, the said economically active bodies have more money to spend or invest,» – says Strautins.
Western Bank economist Igor Zuyev also believes that the downslide of European countries’ economy will also negatively affect Latvia’s economy, because export is mainly directed towards Latvia’s neighbours in Europe. «We can prepare for this scenario by increasing the competitiveness of our economy, improving the climate for foreign investments and have a more active role on other markets outside of Europe,»- says the analyst.