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Ceturtdiena 25.05.2017 | Name days: Junora, Anšlavs
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Experts point to slow productivity rise in Latvia’s economy

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThere are unbalanced risks in the development of Latvia’s economy. They may threated both growth rates and compliance with fiscal discipline in the future, as concluded in this year’s first meeting of the Fiscal Discipline Council’s GDP work group.

Wages have been growing more rapidly than productivity in Latvia for the past couple of years. If this tendency continues in the future, the competitiveness of exports will become worse. Investment activity on the other hand remains weak in spite of showing some growth in the past two years, experts say.

«Although we are witnessing solid GDP growth, this kind of development cannot be considered sustainable and quick enough – if current tendencies continue, Latvia’s economic growth will slow down. The main problem lies in slow rise of productivity, which is currently behind wage growth. The current unemployment level is below 10%. It is very close to Latvia’s labour market’s natural unemployment level. It means that pressure to raise wages will remain and will likely become stronger. Riga is of especial interest, because its unemployment level had dropped to 5% at the end of 2015,» – says the work group’s head Martins Kazaks. «The problem is not with wage growth – it is with slow productivity growth.»

«In total, Latvia’s economic growth rates are considered relatively good. However, good economic development chances should not be taken for granted when planning finance policy. It is worth keeping in mind that current conditions – low level of investments, unbalanced growth of productivity and wages and the lack of structural reforms – all service to put at risk sustainable economic growth. Developments in global economy do not bode well for a quick recovery of the economic environment. All of the aforementioned factors negatively affect the potential of Latvia’s GDP,» – adds the council’s associate Morten Hansen.

The council is an independent institution that was created to ensure supervision over compliance with fiscal discipline rules. The council began its work on 1 January 2014. Among members of the council are people like former part-time advisor to Finance Ministry on matters of public finances Janis Platais, public finance director Andzs Ubelis, Chancellor of Riga Technical University Ingars Erins, head economist of Swedbank in Latvia Martins Kazaks, head of Economics Department of Stockholm School of Economics in Riga Morten Hansen and Vice-Governor of Bank of Estonia Ülo Kaasik.

Ref: 102.109.109.6987


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  1. Andris Banders says:

    What consideration has been given to the role of skills levels and innovation in productivity?

    Thumb up 0 Thumb down 0

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