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Monday 16.07.2018 | Name days: Hermīne, Estere
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Economic Diary of Latvia. The link between trust and savings

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe situation surrounding the 2016 budget of Latvia remains tense. The Saeima has approved the legislative draft in the first reading this week. This comes as no surprise. What is surprising is that the document continues being successfully approved even though no one likes it and criticisms continue showering down on it.

In accordance with the established tradition, the fiercest critic of the budget is the Bank of Latvia. Ilmars Rimsevics, Governor of the Bank of Latvia, continues criticizing the budget. The head of the bank’s Monetary Policy Department Uldis Rutkaste joined him in his hate of the budget. He and his chief believe Latvia must not live in debt (the budget of 2016 contains 1% deficit). In addition, the state debt continues growing, and it is worth thinking about revenue to cover it. But where to find the money? The expert believes the government does have a plan in place. With that, residents can expect certain taxes going up in the near future and new taxes popping up soon. In a situation when there is no stability anywhere, it will only create more uncertainty, which will no doubt make investors even more cautious than they are now, believes Rutkaste.

Finance Minister Janis Reirs believes Latvia’s budget for 2016 will allow the country to maintain its status as one of the most rapidly growing economies in Europe and Eurozone. According to the minister, future budgets will be focused on providing stable economic development. What else would he say? Admit work on the budget plan was sloppy?

Opposition parties, on the other hand, can say whatever they want, and they do. Leader of Latvian Regional Alliance Martins Bondars deserves a special mention: he compared the budget plan to an army boot that doesn’t fit. In addition, he believes that applies to Latvia’s budget for 2016 – it doesn’t fit. Bondars added that the country is hungry for more rapid economic growth. The budget plan for 2016, unfortunately, doesn’t mention development.

President Raimonds Vejonis has criticized the budget as well. He said many people remain dissatisfied with the budget development process.

The president believes it is necessary to introduce a regulation that would govern annual review of base budget expenses by the Cabinet of Ministers in order to secure more effective and comprehensive use of budget funds.

Prime Minister Laimdota Straujuma admits defence has been chosen as a priority as a necessity. According to her, this priority was forced by recent geopolitical developments outside of Latvia. Had there been no problematic developments, it would have been better to use this money to improve healthcare in Latvia. Instead healthcare improvement measures will be a priority for 2017 budget, said Straujuma.

Every man for himself

The population does not expect any miracles from the government. People have long since learned to fend for themselves.

First of all, according to results of a survey carried out by SKDS, 74% of Latvian residents do not trust the Latvian parliament.

Secondly, this is one of the reasons for…the improved financial state of Latvian residents in 2015. According to results of the Baltic Household Outlook by SEB Bank, value of assets has grown more rapidly than the size of commitments. This means people have started making savings more actively without paying much attention to bank loans or the state.

Calculations in all three Baltic States have shown that savings of Latvian and Lithuanian depositors who already had savings on their accounts (at least EUR 1.6 thousand) have grown more rapidly than savings of other depositors in 2015.

Successful businessman = dishonest person?

Another interesting piece of research has been published by EY this week. According to information compiled during the research, nearly half of Latvian residents believe successful businessmen are dishonest people.

45% of respondents said successful businessmen are not always considered honest people. Approximately 48% of respondents have said successful businessmen are considered to be tied to state governments or politics. 30% of respondents believe successful businessmen are just people who ‘got lucky’.

12% of respondents believe successful businessmen are considered creative and active people.

Russian-speaking residents are somewhat more positive than Latvian-speaking residents in their opinion about businessmen. 39% of Russian-speakers and 50% of Latvian-speakers agree with the statement that most businessmen are regarded as dishonest people in Latvia.

Earlier SKDS had published a detailed survey that yielded interesting results: 75.2% of respondents believe the country is managed in compliance with interests of a small group of influential people. Often such groups consist of ruling political parties and commercial structures related to them. The banking system is disliked by Latvian residents the most. According to hem, it is tightly linked to the interests of certain politicians and if one of the main reasons for the country’s financial failures.

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