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Wednesday 21.02.2018 | Name days: Eleonora, Ariadne

Nordea: Baltic State face a real obstacle race

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«In addition to uncertainties with Brexit and the current geopolitical situation, obstacles that we see in global growth and weak Eurozone growth outlooks serve to limit exports and investment-focused growth opportunities in Baltic States,» – says Nordea Bank’s economic expert in Latvia Gints Belevics.

«Although consumers remain immune to the unfavourable external environment, without faster investments to improve export potentials, we can expect a decline in growth potential in the medium-term perspective. Weak growth indexes in Estonia, Latvia and Lithuania will reach 2.6%, 2.8% and 3% in 2017. Under conditions of increased uncertainty, we can expect a slight increase of inflation,» – says the economic expert.

«The open economy of Baltic States will face many major obstacles associated with weak global growth indexes and slow growth outlooks in developed countries. Along with the growing geopolitical uncertainty in Europe, it is not possible to predict growth for export revenue and indexes associated with them. Domestic consumption remains the main driving force in Baltic States,» – says the bank’s expert.

«Annual growth has become slower in developed countries, reaching a mere 1.5%. Unfortunately, outlooks for the next year predict insignificant cyclic recovery. Slow growth of productivity and wages in the context of continued low rates shows that growth indexes remain under influence of a number of structural factors (which is typical for secular stagnation). In addition, the slow economic growth in China and its transfer from a production superpower to more of a service-oriented economy will be considered a significant trend that will affect the revenue of exporting companies, even such far-away countries like Baltic States. In this context it should also be added that growth of global growth and trade indexes at 3%, in addition to moderate product price rise, can be considered a new norm we should all get used to. We expect that, similar to Eurozone, Baltic States will continue experiencing cyclic economic recovery, which is mainly driven by private consumption and powerful housing market support,» – Belevics continues.

According to him, growth balanced by domestic factors in Baltic States will be associated with powerful labour market. It is expected that the unemployment levels in Latvia and Lithuania will have declined by 2.6% and 1.1% respectively in 2015-2018 period. In Estonia, unemployment may rise 3% in spite of stable labour force demand.

«As the consumption boom settles down, employment growth calms down and inflation grows, Baltic States will be forced to run a true obstacle race to increase revenue from exports under conditions of macroeconomic obstacles. The main objective on the road to raise productivity to average levels of Eurozone should be the investment of resources into knowledge-based dynamic economy and structural reforms on the labour market,» – said the economic expert.

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