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Monday 19.03.2018 | Name days: Jāzeps

Latvia expected to have the most rapid growth among Baltic States

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«In 2015, Latvia will have demonstrated the most powerful GDP growth among Baltic States. Latvia will have demonstrated growth equal to about 2.4%. Lithuania’s growth expected to be close to 1.8% and that of Estonia – around 1.3%,» – predicts Nordea Bank.

According to the bank, Latvia’s GDP growth is expected to be 3.0% next year.

«Lately the main growth factor in Latvia has been high private consumption rates. State expenditure is expected to grow as well. One positive tendency has been noted in investments in the past six months. We expect investments to grow even more in 2016. Although currently experiencing growth, export will not be all too great. The main reason for that is geopolitical tension and caution on the global investment front. Product and service import can potentially have a big impact on GDP growth as well. Thanks to residents’ purchasing power, it will continue to increase trade balance deficit,» – predicts Nordea Bank’s economist in Latvia Gints Belevics.

«Stagnant on one side and heated on the other – this probably the most accurate description of the Baltic economy. Post-crisis export growth is weak. Domestic economy continues to heat up. The main factor that influences internal consumption is the rapidly growing wage level. It has already reached 5%-7% in all Baltic States. Adding to that, there is the declining unemployment level, modest inflation and stable consumers’ purchasing power. Lithuania is currently in the lead in terms of private consumption growth (+5.3%), followed by Estonia (+5.1%) and Latvia (+3.4%). It is expected that Latvia’s and Lithuania’s private consumption rate will remain in 2016 and 2017. The situation in Estonia is expected to stabilize,» – the economist explains.

Over the course of the first nine months of 2015, Latvia’s, Estonia’s and Lithuania’s export levels to Russia had decreased by 21%, 38% and 41%, respectively. Export growth had been affected by this as well, especially in Estonia and Lithuania. Up until now, Latvia has not been affected by Russia’s economic recession and applied sanctions much. This explains why Latvia’s economy now demonstrates the best results across Baltic States. It is also expected that negative influence coming from Russia will gradually reduce in 2016. This is primarily because export levels to Russia are currently low. Secondly, it is expected that export volumes to other markets will continue growing 5-7%, which will help reduce the negative influence coming from Russia. With that, and assuming economic sanctions will remain in place, Russia’s negative influence will have significantly reduced by 2016.

«Global economic growth continues, which is accurately demonstrated in USA and EU, which both show signs of recovery. China, Russia, Brazil and other exporting countries, on the other hand, continue searching for new economic growth engines. China’s current market state presents a risk for global economies in 2016. Other risks are related to low price of oil and other resources, as well as the expected interest rate growth in USA. Geopolitical conflicts in Ukraine, Near East and south-east Asia can potentially negatively impact global economy. This is especially true for the European Union, which is weakest when it’s fractured and the strongest when it’s united,» – says Nordea Bank economist Zygimantas Mauricas.


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