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Monday 19.03.2018 | Name days: Jāzeps

Experts: manufacturing can give one of the largest contributions to GDP

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The output of manufacturing industry in 2012, compared with 2011, has grown by 10.0%. With that, it is expected that this index will not be any smaller by the end of the year. As a result, manufacturing industry could give one of the largest contributions to the increase of GDP, bank economists comment the latest manufacturing industry data.

Bank of Latvia Economist Igor Kasyanov:

Manufacturing industry data with retail trade indexes, good agricultural harvest and stable transport data allows us to hope for a swift GDP assessment at the end of the week.

It is good that every other month brings new comings to the structure of manufacturing industry’s production. Recently though, investment activity grew more quiet. While there was word about a number of serious investment projects in the end of 2011 and beginning of 2012, this information appears to be less abundant in the end of 2012 – seems like manufacturers are taking a wait-and-see position, assessing events on both the global and local markets.

European Commission’s data regarding the mood in manufacturing became accessible in the end of October. According to the information, the mood index reduced by 0.2 points – this shows stability. The quarter’s assessment data shows concerns – the assessment of new orders for next months has significantly worsened. The projected production output for Q4 of 2012 also reduced slightly – 71.6% (Q3 – 72.0%). The most significant production output reduction is noted in beverage production, textile goods production, printing, construction material production, pharmacy, chemical production, metallurgy and manufacturing of cars and other vehicles.

DNB Bank Economics Expert Peteris Strautins:

The September reduction in the output of manufacturing industry in comparison with August is the least helpful event to happen in the last several months. The previous so called “rushed” data did not show anything of the sort to happen in the near future. There is hope that September’s events will become an exception. It should be added that the proportion of orders, especially in export, reached its all-time highest index in August.

I expect economic increase to be based on manufacturing a lot more than it is now. This marks this decade, and it will contribute to a more equal income division. Manufacturing offers wider opportunities for people to build their careers, especially ones that do not kick off with documents of higher education in their pockets, offering wider opportunities to show their abilities.

In addition, manufacturing is mostly located on the country’s territory. The most recent available data regards the year 2009, at the time Riga’s income from manufacturing was 37%, as opposed to 53% proportion of GDP. Therefore, economic growth that is more based on manufacturing will also prove to be reducing in terms of regional differences.

It is unlikely that it is a coincidence that new EU member states with a large manufacturing proportion like the Czech Republic, Slovakia, Hungary, Slovenia are part of EU equal countries, while Latvia with its small manufacturing proportion (which is only now reaching the average among EU states) – is one of the least equal. Tax policy is important, but it does not decide everything.

Chief Swedbank Economist Martins Kazaks:

Even though a detailed look at sub-sectors does not show any signs of slowdown of the general growth rates, economic slowdown will do its part in the world. Manufacturing industry’s output’s growth rates will continue to drop in the remaining months of 2012, and the current two digit growth will only return along with economic recovery and the end of recession in the Eurozone.

There is no reason for pessimism. Attitude is generally cautious though – competition will grow, which means slower growth rates.

SEB Banka Economist Dainis Gaspuitis:

The overall unimpressive September progress was set by a number of factors. For example, the rich August and last year’s September, as well as the partial reflection of the influence of global tendencies. Attention is mainly versed towards the ability of the manufacturing industry to develop, on which general tendencies in the economy are largely dependent. Growth is increasing in separate sectors, which is largely set by the previous rapid growth level. This makes it difficult for many manufacturing sub-sectors to increase output volume at current rates.

Despite complicated events on the global markets and the notable growth rate increase, manufacturing industry has exhibited the ability to develop in this kind of environment. It is very important to continue investing in development, including power output increase. It is expected that manufacturing industry’s moderate growth rates will remain in the coming months as well.


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