bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Monday 17.02.2020 | Name days: Konstance, Donats
LatviaLatvia

A look back at the time after the crisis: «pedal to the metal» policy continues echoing in Latvia

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

SEB Bank, economy, development, growth, industries, contribution«The negative influence left by the «pedal to the metal» policy has continued echoing in Latvia,» says SEB Bank economist Dainis Gašpuitis, looking back at the years after the crisis.

The period after the economic crisis has been challenging and complicated. It took eight years for the economy to recover to its pre-crisis level, says Gašpuitis.

The economist reminds that the biggest decline of 2009 was observed in Q3 – 15.6%. The decline continued throughout 2010. It did recover gradually, and the recovery started in 2011.

Since 2009 Latvia’s economy has increased 26%. Estonia’s economy has grown 43% and Lithuania’s – 39%.

Over the course of these ten years Latvia’s economy has somewhat lost its ratio in the Baltic economy – from 31% to 28%. Lithuania’s ratio is 45% of the Baltic economy and Estonia’s ratio is 24%.

In 2009 Latvia’s GDP per capita was 52% of the average in the EU and was second from the last. In 2018, on the other hand, Latvia reached 69% of the in the EU. Estonia and Lithuania, for which the crisis went easier, managed to reach 82% and 80%, respectively, as reported by Gašpuitis.

What makes the difference in performance?

«During the crisis stage, export sector reacts and overcomes obstacles the most rapidly. Its importance growth by leaps and bounds,» says Gašpuitis. While exports formed 42.5% of GDP in 2009, they reached 61.3% in 2018. Slightly ahead of Estonia, Lithuania’s export ratio of GDP has grown from 51.9% to 75.6% during this period. Estonia’s ratio increased from 60.5% to 74.3%.

The economist says that over the course of these years, exports of wood processing industry has reached first place, reaching 17.6% of total exports of goods. Exports of electrical appliances are in second place (10.4%), followed by exports of mechanical appliances (5.8%) and exports of spare parts of vehicles (5.6%).

Positions of exports of iron and steel have declined in this period of time, followed by exports of alcohol, the economist says. In Lithuania and Estonia there was a decline in the importance of exports of fuel and oil even though they remain some of the main export goods.

Read also: Seven Latvian companies make it to TOP 50 Baltic businesses list

In Lithuania exports of furniture (11%) take second place, followed by food and drinks (9%), as well as plastic and its products (8%). Compared to Estonia, wood processing plays a major role in exports – 11%.

Exports of wooden houses and furniture are among the leading export goods (8%). Exports of electrical appliances (15%) and mechanical devices (9%) play a more important role in Estonia than in Latvia, says Gašpuitis.

The economist says the biggest added value increase in the last ten years in the Baltics was contributed by trade, transports, hospitality, catering and processing industry.

Development of commercial service played an important role in all three Baltic states – 10% in Lithuania, 13% in Estonia and 11% in Latvia.

The last decade in Baltic households

The lowest unemployment level is currently observed in Estonia (3.9%), followed by Latvia (6%) and Lithuania (6.1%). Over the course of the past ten years wages have grown the most rapidly in Estonia – by 86%, reaching EUR 1 397. In Latvia the increase was 68% – reaching EUR 1 091, and 65% in Lithuania – reaching EUR 1 022.

Since the crisis the volume of household deposits in Latvia has increased nearly five times, reaching EUR 6.6 billion, whereas the deposits of companies have increased nearly four times, reaching EUR 4.2 billion. Meanwhile the volume of commitments of households and companies has declined by approximately 40%.

«This partially reflects the situation with investment activity, which, although increased, remains far behind the pre-crisis level and caution still rules the business environment,» says Gašpuitis.

The volume of deposits of households and businesses in Estonia and Lithuania has increased by more than 100% over the course of the past ten years. In addition, there has also been an approximately 20% increase fir the volume of loans for households. However, the volume of loans in Estonia has increased by 4% whereas in Lithuania the volume of loans has decreased 9%.

What can new conclude?

Gašpuitis concludes that in the past ten years Latvia’s economy has managed to recover and demonstrate good growth trends. In Lithuania and Estonia, the biggest contribution came from processing industry.

«ICT sector has been Estonia’s story of success, which also offers all three Baltic States good development opportunities. Lithuania has successfully refocused and has developed its transport service industry, which could be called Latvia’s southern neighbour’s story of success even though the country is likely to face serious challenges in a longer term,» says the economist.

«The negative influence from the «pedal to the metal» policy has continued echoing in Latvia, because of which the contribution from the construction sector, unlike in neighbouring countries, has been lower. The influence of the crisis will remain for years to come, which only stresses the importance of a sustainable policy,» says Gašpuitis.

«The price for giving in to short-term temptations and benefits has turned out rather large. Could we do better? Definitely. But it is worth to look at what has been accomplished, establish the correct priorities and take on new tasks,» proposes the economist.


Leave a reply

Week in Lithuania: retailer Maxima got in trouble, Turkish firm’s assets frozen, New Agency set up

Lithuania's concessions provided to the Polish business group Orlen, operating an oil refinery in Lithuania's Mažeikiai, have helped to improve bilateral relations but were not the key element in their thaw, Lithuanian President Gitanas Nausėda said this week.

BNN summary of the week: Levits urges protecting officials. Riga City Council toppled. Tax changes planned

The BNN gives you a summary of the key events of the past week, told in news stories of the following topics: Serious signals; Perseverance; Dismissal; Tax changes; Media supervisors; Inflation; Slower over the bridge and Belief protectors.

Prime minister orders development of proper government MPC monitoring rules

Latvian Prime Minister Krišjānis Kariņš has ordered Economy Minister Ralfs Nemiro to immediately commence work on a new mandatory procurement component monitoring project and submit it as soon as possible to ensure efficient control over the system, as confirmed by the prime minister’s office.

1 700 medics infected with coronavirus in China; six dead so far

More than 1 700 medics in China are confirmed infected with the new coronavirus. Six of them have already died, as confirmed by healthcare officials.

Number of foreign guests hosted in Latvian places of accommodation up 1.6%

2.85 million foreign and Latvian visitors stayed at Latvian tourist accommodation establishments in 2019, which is 1.6 % more than in 2018. Compared to the previous year, the number of nights spent by visitors increased by 2.6 %, reaching 5.51 million in 2019.

Experts approve Riga Central Station’s Rail Baltica regional train reception solution

A solution has been found to install a four-lane railway section at Riga Central Railway Station to replace the existing two-lane section. This will help secure not only international and airport connectivity for Rail Baltica trains but also further improve intercity and suburban train services, as reported by the project’s representatives.

Beness Aijo asks Vladimir Putin for political asylum; claims Russia has released him

Beness Aijo, who fled Latvia to avoid criminal prosecution for calls of a violent overthrowing of the government, has asked Russian President Vladimir Putin to provide him political asylum. He also claims Russian authorities have released him from custody.

Share prices plummet on stock markets over concerns for coronavirus

On Thursday, 13 February, share prices around the world plummeted as concerns over the Covid-19 coronavirus epidemic in China. London Stock Exchange index declined shortly after British Finance Minister Sajid Javid’s sudden resignation.

Saeima to add considerable amendments to Criminal Procedure Law

On Thursday, 13 February, Latvian Saeima approved amendments to the Criminal Procedure Law that provide the duty to provide truth in testimony if a person uses the right to testify.

Week’s end in Latvia will be snowy, rainy and windy

Strong wind, which may reach a speed of 25 m/sec along the coast, is expected at this week’s end in Latvia. Air temperature, however, will remain mostly unchanged, as reported by Latvian State Environment, Geology and Meteorology Centre.

National Alliance and New Unity may run in Riga City Council elections separately

Following the decision made by the New Conservative Party to run in upcoming Riga City Council snap elections separately, a similar decision will likely be made by the National Alliance «All for Latvia – For Fatherland and Freedom/LNNK» and New Unity.

Airbnb and Vilnius sign «historic» agreement, taxmen to zero in on short-term rentals

Long chastised for little regulation, Airbnb, a popular short-term rentals platform, was praised this week in Lithuania after capital city Vilnius and Airbnb inked an agreement, envisioning that from February 1 onwards Airbnb will automatically collect Vilnius city tourism tax due per night and per person and transfer the sum directly to the City of Vilnius on behalf of hosts.

Latvian parliament dissolves Riga City Council

The Saeima has decided to dissolve Riga City Council. The city council remains active, however, because the law on its dismissal will come to force the next day after its promulgation. Now President Egils Levits has ten days to make his decision on the promulgation.

Tallinn residents reject proposal to limit driving speed to 40 km/h

Residents of Tallinn have rejected mayor Mihhail Kõlvart’s proposal to limit driving speed within city limits to 40 km/h, forcing the municipality to look for other ways to control road traffic speed, as reported by Estonian public media ERR.

Journalists Kalderauska and Eglītis approved as members of National Electronic Mass Media Council

On Thursday, 13 February, Latvia’s Saeima approved journalists Ieva Kalderauska and Jānis Eglītis as new members of the National Electronic Mass Media Council.

European Parliament urges putting an end to illegal pet trade

To protect animal welfare, pet owners and public health, the European Parliament urges the European Union to come up with an action plan to put an end to illegal pet trade, BNN was informed by EP press-secretary in Latvia Jānis Krastiņš.

Kariņš: Baltic and Nordic region should become Europe’s leader

«Baltic and Nordic countries region will be a leader in Europe when it comes to climate policy, innovations and hybrid-security matters. It is in our interest to enhance this commitment by implementing a reasonable and ambitious policy in these sectors,» said Latvian Prime Minister Krišjānis Kariņš during his meeting with Finnish Prime Minister Sanna Marin.

Animal rights activists show footage of cruel treatment of animals at Lithuanian fur farm

Animal rights activists have made a video recording depicting unacceptable conditions in which minks are kept in some fur mark in Lithuania, as reported by Lithuanian public media LRT with reference to Daily Mail.

Latvian government proposes increasing state family benefits

In the context of expected tax changes it is proposed to increase the family state benefit for children, estimating that this may cost an additional amount from EUR 81 to EUR 97 million a year, according to information available to LETA in regards to the offer for tax policy guidelines for 2021 to 2025.

Lawyers: Olainfarm talks should be analysed by law enforcement institutions

Analysis of recorded Olainfarm talks should be entrusted to law enforcement institutions, and all lawyers should distance themselves from people like Mārtiņš Krieķis. «This would be fair,» said board member of United Multidisciplinary Trade Union, lawyer Alvis Pīlāgs and chairman of Latvian Lawyers Association Rihards Bunka about Krieķis as «person without ethics» in an interview to BNN.

Latvia to request Russia to hand over detained National-Bolshevik Beness Aijo

Latvian office of the prosecutor will ask Russia to hand over the recently detained National Bolshevik Beness Aijo, who had fled Latvia several years ago to join Moscow-supported militants in Eastern Ukraine.

Non-taxable minimum and PIT rates proposed to be changed in context of tax changes

In the context of upcoming tax changes in Latvia it is proposed to change the differentiated non-taxable minimum and PIT, as stated in tax policy guideline changes for 2021 to 2025 available to LETA.

Fox News misinterprets facts by calling Lithuanian cities «the deadliest», LRT says

Although Lithuania stands out among other EU member states with its negative statistics with murders, it is wrong to call Lithuanian cities «the deadliest», as reported by Lithuanian public media fact-checking project LRT Facts, which has called the news reported by American media a «Manipulative/sensationalist headline».

SPRK: level of dissatisfaction with electronic communication services up in Latvia

Compared to 2018, the level of dissatisfaction with service contracts among Latvian consumers had increased 20% last year, whereas complaints over the quality of services had increased 9%, according to information compiled by the Public Utilities Commission on complaints received about electronic communication services.

Saeima opposition will not put obstacles for snap elections in Riga

The opposition of Latvia’s Saeima will not turn to President Egils Levits in relation to the legislative draft detailing dismissal of Riga City Council. This means members of the opposition will not put obstacles in the way for snap elections in Riga City Council.


Do NOT follow this link or you will be banned from the site!