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Saturday 19.08.2017 | Name days: Melānija, Imanta
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Hopes for investment inflow following euro adoption have not come true

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUJanuary 1st, 2014 will mark one year since the replacement of lats with euro in Latvia. Looking back at this important event, one can conclude that hopes of euro causing a rapid increase of inflow of investments in Latvia and membership in Eurozone would make Latvia more attractive have not come to pass.

Inflow of foreign and local investments, millions in savings on currency conversion, economic stability and cheaper loans – all of these benefits were promised by officials last year. Now, nearly one year since the adoption of euro in Latvia, one has to conclude that the majority of those promises have failed to come to pass. According to information from the Bank of Latvia, direct foreign investments in Latvia have grown by only EUR 166 million in the first nine months of 2014. Compared to the moment of euro adoption, direct foreign investments have grown by only 1.4%, as reported by lsm.lv.

Head of the Monetary Office of the Bank of Latvia Daina Paule does not deny the fact that growth of foreign investments is, in fact, insignificant. However, she adds that the situation could have been worse.

«We see that investments continued to flow into Estonia, our neighbor and Eurozone member state in the first half of the year. In spite of soon becoming a member of Eurozone, Lithuania has experienced a decline in direct foreign investments,» – she explains.

Economist Gatis Kokins, who has always been skeptical about Latvia’s joining of Eurozone, is not surprised by the lack of investments: ‘We still live in a very low GDP growth environment. We still have certain geopolitical risks, and we’ve yet to learn how to make our economy healthier and more attractive to investors,’ – said the economist.

Kokins believes the adoption of euro has not reduced Latvia’s most serious problem – depopulation. «The fact that we continue to live in a very slow economic development environment only serves to increase the risk of depopulation. Latvians continue to leave the country. This is something the economy is unable to tackle at the moment. We see that market growth is the main factor for retail trade and services. While there are some positive changes noted for medium wages, the positive side of things is ruined by depopulation,» – adds the economist.

Euro adoption did not have a positive impact on loan services in Latvia. Information compiled by Finance and Capital Market Commission and Latvian Commercial Banks Association states that the total loan portfolio of all banks working in Latvia has declined by nearly EUR 1 billion in the first nine months of 2014.

Price monitoring carried out by Latvian Economy Ministry shows that concerns that euro adoption would only serve to increase prices have come to pass.

Ref: 102.109.109.5732


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