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Monday 23.07.2018 | Name days: Magda, Magone, Mērija

62% of Latvian residents do not believe the crisis is over

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Аuthor: PantherMedia/SCANPIXA little more than half of Latvian residents (56%) claim they have as much money as they had one year ago. At the same time, one-third of respondents claim they now have even less money.

Contrary to the claims of economists, most residents claim that the economic crisis is not over. Only 4% of respondents believe the crisis has been overcome, according to the DNB bank’s barometer data.

When asked what goods they can afford to spend more money on, respondents often mentioned food products and clothes (17%), shoes and accessories (10%). According to respondents, the increase of their ability to purchase different goods for entertainment, books and toys was minimal. 3-4% of respondents have noted that they are now able to spend more money on these things. Most (66%) note that they cannot afford to spend more money in any of these areas.

Residents are often forced to save money on clothes and different accessories (41%), as well as furniture and different household appliances (40%). This is followed by gifts (33%), travel (31%), sweets (29%), food (29%), etc.

When assessing their spending habits, most of the respondents (64%) note that they always carefully plan their expenses. 27% of respondents only plan large expenses. Only 6% of respondents do not follow their own expenses. It should be added that the proportion of respondents who always plan their expenses has increased by 10% since 2008.

“It is only left to mention that either society has managed to develop new habits thanks to the crisis or this is only a phenomenon, showing that the crisis is not over, and that the growing retail-trade expenses are related to inflation, the boom of “fast credits” and other financial factors. And even if the latter is what we see now, we should not be surprised that every piece of information we hear about economic changes (including Euro adoption) and the possible rise in prices or other related drastic changes cause the society to prepare for hard times,” – SKDS Director Arnis Kaktins comments the situation.

Meanwhile, Bank of Latvia economist Agnese Bicevska emphasizes: “The income in the person’s hands is but one question. But it is important to remember just how reasonably we use our money. Undoubtedly the crisis was a harsh teacher. The habit of reasonable income management should be retained by Latvian residents even as their income increases. This kind of habit is useful for family budget planning. It also positively affects the competition between traders. The more buyers follow price changes and compare them, choosing the most economical ones in the process, the more traders will be forced to think through their own price policy.”

The results of the survey also show that most respondents always (63%) or sometimes (30%) evaluate the price of an expensive product or service before paying for it.

46% of respondents say that expenses are calculated based on necessity. 11% of respondents note their families always create a general family budget. The fact that a family compiles a general layout for the budget with each family member paying for specific needs is mentioned by 22% of respondents. This kind of budget planning method is not typical for 17% of respondents – this proportion of interviewed Latvian residents mostly lives alone and pay for all expenses themselves.

When asked about their plans about preserving their income at the same level upon retiring, respondents most often mention that they plan to depend on a beneficial state social policy (appropriate pension amounts, healthcare, etc. – 22%). 19% of respondents plan to create savings or leave Latvia (18%). 10% of respondents plan to make long-term investments. 6% plan to depend on their children. 12% of respondents have noted that it is too soon for them to think about retirement.

“The fact that respondents plan to have their income increase upon retiring shows that residents approve of the government’s retirement plans and social benefits. Residents’ trust of the state social security system should be improved, because it motivates employment and the increase of social security to society as a whole. However, the survey also shows a frightening tendency as well – nearly one-fifth of respondents admit their financial well-being depends on savings. Less than one-tenth of respondents believe their children will take care of them,” – says Welfare Minister Ilze Vinkele.

Meanwhile, DNB economist Peteris Strautins notes: “The most popular answer to the question – How to increase the quality of life upon retiring? – is trusting the state. This, of course, will gather criticism from my colleagues. It is also clear that preservation or increase of income upon retirement is not the most probable outcome with this model of thinking. But I would not like to turn to the critical attitude toward the state pension system. It will remain as an important benefit in retirement. There is no real need to rigorously save money, as the 19% of respondents suggest it. The fact that only 6% of respondents plan to depend on their children during retirement is an interesting fact, seeing as though this is often the only viable strategy for Latvian residents.”


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