bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Tuesday 23.05.2017 | Name days: Leontīne, Ligija, Lonija, Leokādija
LatviaLatvia

Swedbank: world’s economy is a hostage of populism

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUInvestment activity has been unexpectedly week at the beginning of the year. Because of this, Latvia’s GDP growth outlook has been reduced to 2.1%. In spite of the decline in investments, the number of employed people continued to grow bit by bit in the first half of the year. The same can be said about wages and expenditures of Latvian households.

Although GDP is significantly lower than the government had previously expected, tax revenue fits the plan. With that, the budget situation is stable. Populism and geopolitics remain a source of worry. Nevertheless, the global economy continues to grow, giving Latvian exporters the opportunity to grow and earn money. Along with the inflow of structural funds and more active investment environment, Swedbank predicts Latvia’s economy will grow 3.0% in 2016. If the banks’ loan portfolios grow some more, Latvia’s economic growth may reach 3.3% in 2018.

The world’s economy is currently characterized by unequal and rather slow growth. GDP growth rate is expected to exceed 3% in the next couple of years, which is slower than previously expected. Economic growth of USA and Germany will become slower. This is because the business cycle in those two countries is approaching its maturity phase. Eurozone’s growth rate will remain around 1.5% annually, but with major differences among countries: Spain will grow 2-3% and Finland’s growth is expected to be 1%. With lower budget expenditure support, Sweden’s growth will drop to 2-4% growth. Consumption and housing sector will remain Sweden’s main economic growth powers. Brexit will impact UK’s economy. Nevertheless, support from British banks will likely help avoid a recession. Because of that, UK’s economy will continue to grow. Russia’s recession has ended, but the country’s economic recovery will be weak – oil prices will grow moderately, but the role of the state in economy is too big and too heavy to allow other sectors to experience major economic growth. China’s economy will continue growing 6.5% annually. Economic growth of 7% is expected in India, notes Swedbank head economist Martins Kazaks.

Central banks maintain supportive monetary policies. Slower economic growth also means slower balancing of interest rates.

Populism, political instability and geopolitical risks are the Achilles’ heel that could potentially lead the world economy into a very bad scenario. In the next couple of years the world economy will often come at a crossroads, where a single mistake will mean a serious blow to economy. This includes the presidential elections in USA in November 2016, presidential and parliament elections in France in 2017. The possibility of a negative scenario is 25%. The possibility of a positive scenario is 15%, says the bank’s expert.

The main factors that could impact Latvia’s economic growth in a negative way are external – weak EU economy, populism and geopolitical uncertainty. Latvia’s economy could grow significantly more than the expected 3%. The main potential is internal – more optimistic mood among businessmen and households. With that, it is expected that there will also be more active loan activity.

Weak investment activity and construction crisis is largely due to delays with EU funds. It is not, however, the only reason. Milk prices remain low – it is hard for milk producers to survive, let alone invest money. Studies concerning the processing industry mention the lack of demand as the biggest obstacle for production output growth. According to Kazaks, many companies are too careful.

«The construction industry is expected to experience the most problems this year. The number of people employed in this sector has already declined by nearly 10,000 in comparison with 2015. This has not had a big impact on the labour market, however. This is because the total number of employed people has increased slightly. It is surprisingly good! The level of unemployment is slightly higher than was previously expected. Nevertheless – it continues to decline. Wage growth has become slower. It remains within our predicted 5-6% border. We expect there to be growth in the next couple of years as well.

Following a recovery of the construction industry, unemployment is sure to decline. This is because low-qualified workers can become employed in the construction sector. Survey results of European central banks’ loan service accessibility points to an increase in demand for loans. The interest of households towards loans remains low. It is unlikely that we will see any improvement in this area sooner than 2018,» – says the economist.

Ref: 102.109.109.6785


Leave a reply

Interest of Indian youth for study opportunities in Latvia increases year after year

Indian Foreign Affairs Minister Mobashar Jawed Akbar emphasized during his meeting with Latvian Foreign Affairs Minister Edgars Rinkevics that India has experienced very rapid economic growth in the past year. He added that the upcoming Latvian-Indian business forum will be an important step towards closer cooperation in economy.

Latvian government reduces administrative burden on amelioration

Latvian government has agreed to support Agriculture Ministry’s prepared amendments to requirements that dictate construction requirements for waterworks and amelioration systems, as well as cadastral rules. Changes were prepared to reduce administrative burden, Agriculture Ministry reports.

Survey: 32% of Latvian residents have no savings

Losing their income, 23% of respondents would not be able to cover everyday expenses, 5% would be able to maintain payments for less than a month and 20% of respondents would be able to cover a whole month’s worth of expenses, shows the survey performed by Nordea on personal finances.

Producer prices in April grew 0.1% in Latvia

Compared to March, the level of producer prices in Latvian industry grew by 0.1 % in April 2017. The prices of products sold on the domestic market increased by 0.5 %, whereas the prices of exported products dropped by 0.2 %.

LSBA: closure of gambling halls is an attempt by officials to promote their image for elections

Latvian Association of Gaming Business asks deputies of Riga City Council to reconsider their actions in relation to the planned decision to prohibit gambling halls in Riga’s historic centre.

More people have moved to Estonia than left it in 2016

13,792 people have emigrated from Estonia in 2016 and 14,822 have immigrated, Estonian statisticians have estimated, concluding that net migration in the Baltic country has been positive for the second consecutive year.

Saeima to discuss the role of the Security Department of the Bank of Latvia

Saeima’s Defence, Internal Affairs and Corruption Prevention Committee will visit the Bank of Latvia on Wednesday, 24 May, to discuss the role of the bank’s Security Department, as BNN was informed by Saeima’s press-service.

Razuks hints healthcare budget’s increase would require new fees

Sides involved in discussions about finding additional finances for healthcare have yet to reach a definite agreement. It is possible there may be a new fee introduced, said Saeima Public Health sub-committee chairman Romualds Razuks told Rīta panorama on Tuesday, 23 May.

Twelve million euros invested in creation of car wash network in Latvia

Wash & Drive opens the largest self-service car wash station in Riga. In cooperation with Citadele Bank, EUR 800,000 was invested in the creation of this seven-box car wash, as confirmed by the bank.

EC: Latvia’s tax system is less progressive than systems in other EU countries

The European Commission recommends Latvia to reduce the tax burden for small wage recipients and move it to other sources that are less impacting on growth and motivate people to pay taxes.

Latvia to lead joint air and land military exercises this year

Annual international military exercises Saber Strike will be taking place in Latvia from 3 – 15 June. Allied troops and armoured vehicles have begun arriving in Latvia for the upcoming exercises, as reported by Defence Ministry.

Tragic blast shakes Manchester, UK

In an explosion, which has occurred in a mass sports and music events venue in the British city of Manchester, 22 people have died and over 59 have suffered injuries.

Experts: Rail Baltica – connection that benefits everyone

The essence of Rail Baltica project is not combating the trends currently present in the world, but rather using them as an advantage, says advisor to the Bank of Latvia Andris Strazds. He adds that more and more economic and social development is centered in large and urban city centres.

Latvian companies ahead of neighbours in organization of business trips

Latvian businesses are more progressive in the organization of business trips than Lithuania. They do, however, spend a lot of money on planning and organizing of those trips. In addition, they also use inefficient financing methods – 20% of employees are forced to pre-finance their business trips from their own pockets, according to results of an international study.

Riga Eastern Clinical Hospital to identify patients using fingerprint data

Riga Eastern Clinical Hospital has introduced biometric data identification system that will be used to identify patients using fingerprint data, BNN was informed by the hospital.

FDC: micro-enterprise tax has created serious defects

The micro-enterprise tax has created serious defects for Latvia’s tax system, said Fiscal Discipline Council chairman Janis Platais in an interview to Latvijas Avīze.

Microsoft software licences cost Estonia millions each year

Estonian ministries and their subordinated institutions pay a total of under five million euros each year in Microsoft software licence fees.

Latvia’s unemployment rate was 9.4% in Q1 2017

In Q1 2017 the Latvian unemployment rate constituted 9.4 %. Compared to the previous quarter, the unemployment rate increased by 0.1 percentage points, whereas, compared to the same period of the year before, the rate reduced by 0.9 percentage points.

Pension expert: how far can index funds root themselves in Latvian pension plans?

Latvian pension plan clients can still pick existing pension plans with sufficiently flexible deposit policy and possibilities to receive consultations. It should be added, however, that pension plans based on index funds can find clients in Latvia for whom low-price guarantees is important the most, Nordea Pensions Latvia board member Ilya Arefjevs predicts.

Latvian Defence Ministry plans the largest tendering process in country’s history

This summer, Latvian Defence Ministry plans to announce the largest tendering procedure in the history of Latvia’s army. It is planned to procure heavy vehicles to transport armoured vehicles and troops. The total amount for the next ten years may reach EUR 200 million, as reported by Nekā personīga.

Study: engaging in business improves satisfaction with life

It has been concluded that psychological aspects are far more important than financial aspects in business operations – stability, family support, exchange of experience and realization of ideas are important for emerging businessmen, as concluded in a study performed by Altum.

Following use of EU funds, demand for loans increases in municipalities

Demand for loans from the State Treasury has increased after use of EU funds became more active, said Kaspars Abolins, chief of State Treasury, in an interview.

Swiss voters decide to move away from nuclear energy

Switzerland has decided to quit nuclear power stations and opt for renewable energy, show the results of a referendum held on Sunday, May 21, where 58% voters backed phasing out nuclear power.

Child vaccination made mandatory in Italy

Reacting to lower child protection against measles, the government of Italy has decided to make vaccination against 12 illnesses mandatory for children before they start going to state schools.

Deputies to decide on prohibiting gambling in Riga’s historic centre

On Monday, 22 May, deputies will discuss the matter on sorting out Riga’s historic centre. It is stated in new territorial plans that it will be prohibited for gambling halls to be located in this area.

Newest comments