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Tuesday 20.03.2018 | Name days: Made, Irbe

Predictions about Latvia’s economy – major hopes put on EU funds

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUMultiple economists have provided their comments on this year’s GDP predictions based on the Central Statistical Bureau’s 30 January published flash estimate of the country’s GDP. The flash estimate mentions that growth had become stronger in Q4 2016 in comparison with the same quarter of 2015.

Economy Ministry predicts that economic growth in Latvia will speed up in 2017, reaching 3%. «It is important to ensure more intensive investments from European structure funds and encourage businessmen to modernize and expand production. More intensive investments from structural funds would benefit growth in a long-term perspective and benefit current year indexes, especially for investments in infrastructure. It is a direct stimulator of economic activities,» – explains senior rapporteur to Economy Ministry’s national economic structure policy department Ieva Snidere.

She mentioned export expansion as one of the most important conditions for growth in 2017. It is closely related to global economy growth and Latvia’s capabilities to speed up its growth in the EU.

Swedbank economist Agnese Buceniece told BNN that more rapid realization of EU fund projects will assist with growth of investments, which will in turn speed up economic growth. It is expected that actual GDP growth is already getting close to 3%. Investment activity will improve significantly, help pull construction sector from crisis and assist with creation of new jobs, the economist explains.

She notes that growth in Europe will be sustainable. This means growth in external demand, which will assist with export growth. Nevertheless, the risk cloud has yet to disperse and it can still affect economic growth. Buceniece comments that main risks include Trump’s policy and Brexit influence, as well as the upcoming elections in Europe. She adds that there are also internal risks: «Consumers’ mood soured at the end of last year. It is possible that it was affected by the rushed and poorly communicated changes in certain taxes. This general worsening of their mood could be reflected in weaker consumption at the beginning of the year. Because there will be wide discussion about the tax policy in spring, the government should focus on changes to the tax system and appropriate explanations for the public,» – Buceniece said.

She predicts that economic growth will become stronger. Nevertheless, there is no reason to become self-confident. «3% is not enough for Latvia. It is significantly behind the promised 5% goal, which is not possible to reach with the current structural policy and external environment. This is why it is necessary to progress with quality changes in the economic environment. No new medicine has been created. We have to tackle what is already known,» – Swedbank economist explains.

The situation was also commented on by SEB Bank’s macroeconomics expert Dainis Gaspuitis: «The closest three years will be relatively smooth for Latvia’s economy. The situation in Eurozone and the world promises better conditions. This year has all conditions to secure consumption growth. Compared with last year, it should be livelier. A slightly more positive mood will help trends to continue on the real estate market.»

Gaspuitis notes that this year growth may continue in the catering and accommodation services, as the number of tourists continues to grow. Processing industry could be on a wave of rise, which could help it become an important part of the national economy. He adds that export conditions will improve and diversification efforts will continue.

«EU funds can help maintain growth at a minimal level. The biggest risks to Latvia’s economy are associated with changes in the global political conjuncture and geopolitical developments, which could significantly impede growth potential,» – Gaspuitis says.


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