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Sunday 22.07.2018 | Name days: Marija, Marika, Marina

Economic Diary of Latvia. Recovery of Europe's economy is in Latvia's hands

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia’s main objective during the presidency period over the EU Council is the development and launch of Juncker’s investment plan.

As it is known, The President of the European Commission Jean Claude Juncker had presented an investment plan for Europe in November 2014. The main objective of this plan is to stimulate investments in development and creation of jobs.

«This plan will be one of the most significant economic stimulation mechanisms for Europe. This is why we have a high goal ahead of us – to make sure the European Fund for Strategic Investments becomes operational in the middle of 2015. This is why we have made it our duty to ensure regulations necessary for the accomplishment of this goal are approved. This will be one of the main objectives during Latvia’s presidency over the EU Council,» – said Latvian Finance Minister Janis Reirs.

Juncker’s plan provides for the foundation of the European Fund for Strategic Investments. The European Investment Bank will then invest EUR 5 billion and the EU fund will be provided an additional amount of EUR 16 billion from the EU budget. This will create an opportunity to attract additional investments for business development projects. According to authors of this project, the fund will provide investments worth a total of at least EUR 315 billion.

Funding will be allocated using capital deposits, bonds, hybrid instruments and guarantees. Deposits from EU member states will be voluntary.

The new fund and a group of independent experts should become active by June 2015.

In 2014, each of the current EU member states submitted a number of potential projects that could potentially fall under the category of projects financed by this new fund. These projects represent areas like energy, research and development, transport, social infrastructure and environment.

It is worth noting that there is no set limit for the volume of investments and the number of projects that can potentially be provided with EU funding. Economic sustainability will be the main criterion in the assessment of potentially financed projects.

Producers remain active

During the first eleven months of 2014, production volumes remained largely on the level of 2013, notes Swedbank economist Lija Strasuna. In spite of the decline experienced in recent months (partially due to the Russian embargo), production of food products remains positive 3%. Good growth was noted in wood processing (8%), chemical (11%), and mechanical engineering (especially in the manufacture of computers and electronics, where growth was 60%).

At the same time, production volumes in textile and clothes manufacture continued to decline. This was partially because of the decline in demand in Russia.

«On the one hand, demand in is decline in Russia even though Latvian manufacturers are trying to compensate this at the expense of other markets. On the other hand, if Liepājas Metalurgs manages to restart its production, we weill definitely see significant growth in all production areas – says the expert.

Russians – the most active founders of firms

2,647 new companies had been founded in Latvia in 2014. In 17.7% of all cases, there was a foreigner present in the foundation of new companies, according to information from Lursoft IT.

The majority of companies founded in Latvia with participation of foreigners wee founded by Russians (816), Lithuanians (373), Estonia (250) and Italy (250).

Ukraine is on the fifth place with 158. According to Lursoft, the volume of direct investment from Ukraine to Latvia has increased by EUR 9.95 million and the number of business deals has increased by 36.7% over the course of the year.

Number of «newborn» firms in decline; number of «dying» firms on a rise

According to data from the same Lursoft IT, there had been 14,965 new enterprises registered in Latvia in 2014. 13,991 of them are LTDs.

4,152 enterprises had been liquidated in 2013. 6,402 enterprises had been liquidated in 2014.

Lursoft IT representatives believe the increase in the number of liquidated enterprises should not be regarded as a process tied to the decline of the country’s economic situation. Experts believe this is because of changing regulations in the business environment. These changes include the increased activity of the State Revenue Service in the exclusion of companies that have not been economically active for a long time from the register of enterprises. Information from Lursoft IT states that zero turnover is shown by approximately 15-20% of all enterprises that have submitted annual accounts.

In regard to the age of enterprises that are being liquidated, the majority of them were founded in 2004 or 2005. Most of the companies that have been liquidated were engaged in trade, real estate and construction.

As for new companies, registered in 2014, the majority were founded as LTDs with reduced base capital – 9,201 (7.52% of them are already liquidated) or 61.48% of the total number of enterprises founded in 2014.


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