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Tuesday 21.11.2017 | Name days: Andis, Zeltīte
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Economists: Now is the time for reforms

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Latvia has done a lot during the recent years. Economic growth has been restored and the country ranks as the fastest growing EU economy for two quarters in a row. But there are also certain risks that can spoil the potential, according to the Commercial Banks Association (CBA).

There are some very dangerous process accompanying fiscal stabilization, renewed economic competitiveness, export growth and recovering domestic demand.

Although the pace of emigration is slowing down, it has not been stopped. It is not an easy task, but such a goal should be on the agenda, because Latvia keeps losing its potential due to low birth rates, the CBA says.

Meanwhile, lack of reforms in the higher education sector has led to the following situation – young people are wasting their time on studying to become poorly demanded specialists.

It all depends on whether the positive or the negative trends take the upper hand, the Association says.

“Since 1995, Latvia has been between 10% of the fastest growing economies (per capita). Much has been achieved, but it is not enough to ensure sustainability. Short-term success does not ensure long-term achievements, if you do not move on,” say experts Martins Kazaks and Peteris Strautins.

Kazaks is CBA Chairman of Economic and Monetary Affairs, as well as Swedbank’s chief economist.

Strautins is an economic expert at DNB Bank.

Therefore, the CBA suggests the government not missing out on the right moments and achieving stability and sustainability. This can be done by continuous effort to carry out reforms. The government also need to practice wiser spending and come up with adequate solutions for structural unemployment and labour shortages.

“It is easier to implement reforms when the economy is growing and investors trust the country. This is now. When Latvian success story wears down, it will be much more difficult to introduce any changes.”

The economists suggest shifting away the labour tax burden to property taxes.

They also hope that the new National Development Plan will not serve as a mere wish list.

“For sure, the most difficult decision-making will concern which regions exactly should be developed,” they say.

According to Kazaks and Strautins, the eurozone crisis still creates the biggest risks.

If the uncertainty lingers, also Latvian growth will no longer show that bright performance. Therefore, the CBA expects that the economic growth rates will slow down to 3.1% next year and 4% in 2012.

“We need to get rid of the feeling that Latvia is a failed economy. But neither should we have any illusions about the challenges the economic and social processes can bring.”

Ref: 102.105.105.2545


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