Latviski English По-русски
Tuesday 20.02.2018 | Name days: Smuidra, Vitauts, Smuidris

SEB: Eurozone is a child under the care of the global economy

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«The largest headache for the world’s economies is the ruling cautiousness. The wide range of economic policies and different economic measures is becoming thin. The efficiency of the current ones is in decline as well. However, it is not too late,» – says SEB Bank economist Dainis Gašpuitis.

The global economy, on the other hand, continues to receive support from monetary expansion and convincing recovery of USA. All signs point to weak economic growth. Lower energy resource prices will prove useful for households and investments. Member states of the Organisation for Economic Co-operation and Development will be able to increase their GDP by 0.5 percentage points. However, economies of the world remain under pressure from debts and slow growth of revenue, complications within rapidly growing economies, low investment appetite, welfare inequality and geopolitical tension. These factors create a risk of slow and demand and deflation.

Inflation has demonstrated new surprises, and many countries have slipped down to dangerous levels. In the next couple of years inflation will remain low. It will grow very slowly and carefully. Structural changes in the labour market will only add to its effect. Well-educated labour reserves from Asia and Africa will become more involved in global economies. In the West, however, new jobs will be created primarily in the low-wage sectors. This will slow down wage growth. A decline is also expected in many raw material product markets.

According to the bank’s expert, the zero interest rate environments raise the matter regarding responsibility of economic policies. The risk of stagnation and deflation means there should be a pragmatic fiscal expansion. Japan has put off the next step to increase consumption tax. Countries like Italy and France have added discounts under budget deficit conditions. Pressure is growing on Germany to realize an expansive fiscal policy, because its economy and exports benefit from euro’s weakening and low interest rates.

USA is currently viewed as an example of a success: it is expected that this country’s economy will grow 2.3% this year, 3.4% in 2015 and 3.1% in 2016. Because of the reduction of debts of households, the efficiency of the monetary policy increases. Notably lower energy prices, growing welfare of households and declining unemployment will help USA overcome this complicated global situation and strengthen dollar’s positions, says Gašpuitis.

BRICS countries all demonstrate different perspectives. China’s main economic engine is slowing its speed, which is affected by the growing uncertainty in the real estate sector and loan market. The government is aware of these problems, as well as the financial means to resolve them, which will allow China continue its growth. India’s economic growth will become slightly faster thanks to its recently implemented reforms. Russia’s economic perspectives seem rather poor. Its main problems are mostly related to the geopolitical situation in the world and declining production volumes, which is caused by insufficient investments over the course of many years and the ageing of the population. The sudden decline of the Russian rouble only further proves Russia’s economic and financial instability, which also increases geopolitical risks. It is likely that Russia’s economy may face a cycle of stagnation.

Eurozone, however, is a child under the care of world economies. Recovery is going slow, the rising decline of member states in regard to independence of their economic policies and intentions to steer away from common game rules maintains uncertainty in regard to the developments of Europe’s political processes. Economic growth became slightly more stable after the European Central Bank performed an assessment of the banking system. Lower prices on energy resources, weaker euro and less strict fiscal policy will surely assist it. Economic processes in Italy and France have turned the wrong way. Economic growth in Spain, on the other hand, has been restored. Eurzone’s GDP is expected to be 0.9% in 2015 and 1.3% in 2016. Germany’s readiness to begin a more expansive fiscal policy will be the deciding factor that will improve Eurozone’s growth perspectives and overall stability of the euro.

«Economic perspectives of Baltic States have become slightly more grounded. A more equalized growth is expected to come in 2016. Consumption will remain the main economic engine even though wage growth of households will become slower. Unemployment will continue to decline, but slower than it did in previous years. Exports and capital expenses will recover slowly. The crisis in Ukraine, stagnation in Russia and geopolitical tension will continue to cast a shadow over economic development. 2015 is expected to bring a slight speed-up of economic growth, especially in Estonia’s case, which has experienced a more apparent slowing of economic development. Lithuania and Latvia will recover their places among the most rapidly growing economies in Europe. However, their actual growth will be slower than their potential,» – predicts Gašpuitis.

Sweden’s economy demonstrates a strong domestic demand, which is directed by household consumption and rising construction of apartments. Weak accomplishments are noted in exports. Public sector’s debt will remain below 40% of GDP. The situation in the labour market gradually improves, but because labour force offer continues to grow, unemployment decline will remain slow.

Finland’s economy currently deals with structural problems in forestry and ICT sectors, influence from Russia’s and the country’s own austerity policies, which slow down economic growth. A weaker euro will only benefit Finland’s exports.

Denmark’s economy demonstrates a dual situation, as there are positive and negative factors for future development. Geopolitical developments will play a big role in the near future. The country’s fiscal policy will become more stimulating after the expected elections of 2015.

Norway’s economy demonstrates different directions. Negative factors include the increase of capital expenses in the oil and gas industry and low investments in housing construction. The country’s labour market, on the other hand, has stabilized. This and growth of actual income will help maintain consumption rates.


Leave a reply

European exchange indexes decline; Wall Street enjoys a holiday

European exchange indexes declined on Monday, 19 February. No trading was performed at American stock markets, because the country was celebrating President’s Day.

Party: Latvian banking system’s crisis threatens Skanste neighbourhood's development

There are serious risks associated with European Union’s co-financed project for the revitalization of Skanste neighbourhood, including construction of Skanste tramway line, says member of Riga City Council and For Latvia’s Development party Viesturs Zeps.

Public opinion: KGB documents should be made publicly accessible immediately

Latvia’s society believes the KGB documents should be made publicly accessible immediately. In addition, residents say they are confident in their ability to discuss those documents without the country’s supervision, which takes the form of expert opinions prevailing over society’s moral views, as stated by guest researcher of History Institute of the University of Latvia M. His. Marta Starostina.

For Latvia’s Development: the prime minister is gone, but finance minister claims otherwise

«What we have observed in the past several days is that Latvia’s financial sector has received several heavy strikes as a result of the government’s uncoordinated and chaotic actions. Prime Minister Māris Kučinskis has evidently ‘disappeared’ and offers no clear plans to resolve the crisis, whereas Finance Minister Dana Reizniece-Ozola says different things in every interview. Such behaviour will not help resolve the crisis. It could instead pull the country’s financial sector in a much deeper crisis,» says chairman of For Latvia’s Development Juris Pūce.

Bank of Latvia provided ABLV Bank with a loan of 97.5 mln euros in exchange for securities pledge

The Bank of Latvia has provided ABLV Bank with a loan worth EUR 97.5 million in exchange for securities pledge, as confirmed by the financial institution.

Prime Minister: Bank of Latvia governor is not allowed to take official post

As a security measure, the governor of the Bank of Latvia Ilmārs Rimšēvičs has been applied with a prohibition to take post, said Latvian Prime Minister Māris Kučinskis after a meeting of the Cabinet of Ministers.

Poland's halt to logging in ancient forest came after irreparable damage

Although Poland has stated logging in the old-growth Bialowieza forest has been stopped, Warsaw has failed to reveal the amount of trees already cut down.

«A good friend» pays 100,000 euro bail for arrested governor of the Bank of Latvia

Corruption Prevention and Combating Bureau (CPCB) has applied a bail of 100,000 euros for the arrested governor of the Bank of Latvia Ilmārs Rimšēvičs. The bail has already been paid to the State Treasury account, as confirmed by his lawyer Saulvedis Vārpiņš.

NP: ABLV blames Latvian officials for misleading foreign institutions

Last week, the reputation of Latvia’s second largest bank – ABLV – was seriously impacted. It is believed that money laundering was this bank’s main operation, and that it failed to comply with the prohibition on cooperation with North Korea. The bank is also accused of bribery. US Department of the Treasury Financial Crimes Enforcement Network rarely speaks so directly of any credit institution, says Nekā personīga programme.

Changes to third-country student residence in Estonia to add more responsibilities to university staff

The Estonian government has backed planned amendments are to the Aliens Law implementing an EU directive into Estonian law, which change how third-country nationals on enter and reside in Estonia if they are study or performing research work.

Russia criticises U.S. charges of Russian meddling in U.S. election

The Foreign Minister of Russia, Sergei Lavrov, has criticised the charges announced by the U.S. Federal Bureau of Investigation, against 13 Russian nationals and three companies for election meddling.

Government plans to form four riot prevention units in Latvian regions

The State Police plans to form four riot prevention units in Latvia’s regions, says Chief of State Police Ints Ķuzis.

Syrian Kurdish fighters under attack by Turkey announce deal with Syrian government forces

The mainly Kurdish militia in the north-west of Syria have announced having reached an agreement with the Syrian government for the latter to deploy its soldiers in order to help Kurds repel the current Turkish attack.

NCP: it is highly important to replace management of Bank of Latvia and FCMC

Considering recent events, which have not only impacted the country’s finance sector but also its international reputation, the New Conservative Party (NCP) demands immediate measures to be undertaken to replace the management of the Bank of Latvia and the Finance and Capital Market Commission. On top of that, it is also necessary to perform radical changes in the organization and supervision of those institutions, says NCP chairman Jānis Bordāns.

Air temperature in Latvia to gradually decline this week

On Monday, 19 February, atmospheric pressure will increase slightly in the north. With that, it is expected to snow only around Kurzeme’s south-west. Air temperature in most of Latvia will stay at -1° C… -6° C. In Kurzeme, however, air temperature will be around 0° C… +1° C, as reported by State Environment, Geology and Meteorology Centre.

Week in Lithuania. Lithuania celebrating centennial of statehood

Leaders of European countries gathered in Vilnius on Friday, February 16, to celebrate the 100-year anniversary of restored statehood, and festive events were taking place in many cities and towns of Lithuania.

BNN summary of the week: minister threatened with dismissal; ABLV Bank scandal

BNN offers a summary of this week’s topical news in a variety of categories: Change; Fight; Court; Problem; Decline; Commentary; Future; Proposal

SRS uncovered violations in 169 inspections at catering companies last year

In 2017, the State Revenue Service (SRS) performed a total of 989 inspections at 212 catering companies. This includes 182 thematic inspections for 125 taxpayers. Violations were uncovered in 169 inspections. The most common violation was manipulation with cash registers, according to information published by SRS.

Russian tourists often decide to celebrate International Women’s Day in Riga

To satisfy growing demand for bus tickets from Russia to Latvia for the week when 8 March is celebrated, Lux Express plans to organize additional buses between St Petersburg and Riga.

FCMC to investigate ABLV Bank again; no operational restrictions applied to the bank

Latvia’s Finance and Capital Market Commission (FCMC) has plans to perform an additional investigation at ABLV Bank in the next couple of weeks, says the commission’s manager Pēters Putniņš, adding that no operational restrictions have been applied to the bank so far.

Study: overall sense of happiness in Latvia is record-low

60% of Latvian residents feel happy. Although this is a good index, there has been a general decline of the sense of happiness, according to a study performed by Amigo mobile network operator and SKDS to assess the level of happiness of Latvian residents.

Raid reveals some taxi drivers in Riga do not have valid driver’s license

A raid was performed by the State Revenue Service and Riga Municipal Police to check taxi service providers in the capital. Authorities uncovered a total of 81 violations in 48 cases, BNN was informed by SRS.

Estonia sea ice crash: last missing body found

Nine days after a van with six people inside drove onto the ice of the Baltic Sea in south-western Estonia, the body of the last victim has been found.

Delna invites immediate investigation of claims about ABLV Bank’s money laundering schemes

The decision by US Finance Ministry’s Financial Crimes Enforcement Network (FinCEN) to apply sanctions against ABLV Bank for involvement in money laundering schemes and bribery of officials was not a surprise. It is a sign for acute need to continue improving investigative and supervisory institutions’ ability to prevent money laundering through Latvia, as noted by Delna – Society for Openness.

Estonian income tax should be simplified, parties believe

The existing income tax scheme in Estonia should be simplified, three parties in the Estonian Riigikogu find, but there are differences in opinion as to maintaining the current state budget income. Meanwhile, the opposition Reform Party has voiced backing for an annual tax-free income of 6,000 a year to every earner.