Latviski English По-русски
Saturday 21.07.2018 | Name days: Meldra, Meldris, Melisa

Economists: Latvia’s economic growth is becoming slower

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUEconomic growth has become slower in Latvia. It has become stronger and more balanced, however.

The external environment will remain relatively weak, but it will recover bit by bit. No significant changes are expected to come after Saeima elections. Even reforms are not expected to impact things all that much, believes Swedbank economists Mārtiņš Kazāks and Lija Strašuna.

According to them, differences in development rates of economies are becoming clearer. For example, USA’s economy continues its stable growth. Eurozone’s recovery, on the other hand, is becoming slower even in spite of aggressive stimulations from the European Central Bank.

Germany plays an important role in Eurozone. Internal consumption in Germany has declined recently. Economists believe there have to be fiscal policy stimulations in order to improve economic growth in the future. However, there are concerns over politicians’ ability to reach an agreement in regard to such solutions.

India has good conditions for strong market development. China’s economic growth will likely slow down. Brazil is facing enormous economic challenges and Russia’s economy is slowed by chronic structural and institutional problems, low oil prices and sanctions. Russia’s economy will likely remain weak in a long-term and short-term perspective.

‘Russia’s economy did not drown in recession earlier this year because imports had rapidly declined. Household consumption is very weak and it will likely start to decline in the near future, because the growing inflation reduces residents’ purchasing power. Investment has begun to decline even before the Russian-Ukrainian conflict, and will continue to do so in the near future, because funding is becoming scares and expensive. It is likely that Russia will descend into a recession. Very slow economic growth may return at the end of 2015 or 2016,’ – said Kazāks.

Economists have slightly reduced the outlook for the base scenario of 2015-2016. This is mainly because of Eurozone’s weak economy. The negative scenario has a 25% probability (escalation of the conflict in Ukraine, deflation risks in Eurozone, repeated fluctuations in the finance sector). If ECB provides a more powerful and effective scenario, there may be a more positive scenario.

‘There may be relatively slow economic growth, which could rise thanks to gradual economic growth of Latvia’s trade partners and stabilization of the Russian-Ukrainian conflict. Even though household consumption is likely to serve as the main engine this year, economic growth will gradually become more balanced. Negative risks remain higher than the possibility of a positive scenario,’ – says Strašuna.

Latvia’s export volumes have been good this year. This is in spite of slower development of Eurozone and low demand coming from Russia. However, considering low inflation environment (lower raw product prices and Russian embargo), it is now more complicated to increased export value. Exports to Russia are on a decline. This, however, is compensated by growth on other markets (UK, Poland, Sweden, Turkey and Hungary). It is expected that exports to European countries will continue growing relatively quickly. Liepājas Metalurgs plans to restore functionality again before the end of 2014. This could potentially increase export volumes by at least 1-1.5 percentage points. Export growth outlook is not reduced for next year in spite of expected economic decline in Eurozone.

Considering all geopolitical risks, entrepreneurs have become cautious in their investment plans. It is expected, however, that investment activity will improve closer to the end of 2015 and beginning of 2016.

It is expected that salaries will continue to grow, but slower than they did in the first half of 2014. Growth of average wages may reach 4.5% next year and 5.5% in 2016. The number of employed persons is not expected to change much. Creation of new jobs is expected to become more active in 2016. The proportion of employed persons will mainly reduce because of emigration and negative demographic trends. The proportion of vacancies grows slowly, with that there are no massive balance fluctuations on the labour market that could potentially motivate a rapid wage growth. Growth of production efficient remains slow and if the gap between wage and production does not reduce, there could be competition problems in the future.


Leave a reply

SRS: cash register reform still stagnates, but has become much faster than it was last year

The cash registers reform continues stagnating. However, it has become much faster than it was a year ago, as reported by State Revenue Service.

Specialists to search for solutions to topical environmental problems in Ventspils

On Friday, 20 July, a meeting was held between Ventspils Commercial Port representatives and specialists from State Environment Service.

Children with functional disorders to receive services financed by EU funds

Child invalids will have access to social services intended to improve their social skills and mobility. More than EUR 4.2 million has been allocated for this goal from the European Social Fund, as confirmed by Latvia’s Central Financing and Contracting Agency.

Producer price level in industry up 4.3% in Latvia

Compared to June 2017, the average level of producer prices in Latvian industry increased by 4.3 % in June 2018. Prices of products sold on the domestic market rose by 4.8 % and those of exported products by 3.7 %.

Total tax debts in Latvia in July – 1.212 billion euros

At the beginning of July total tax debts in Latvia, including outstanding debts, halted debts and debts applied with repayment term extensions, accounted for EUR 1.212 billion, which is 0.8% less than a month prior, according to data from the State Revenue Service.

Survey: every third Latvian resident has received illegal loan offers

Nearly every third resident in Latvia or 31% of respondents admit having received offers to use illegal loan services, as concluded in a survey performed by Latvian Alternative Financial Services Association and SKDS.

Libya opposed to EU's idea to establish migrant centres in North Africa

Libya is against the solution of the European Union to set up migrant centres in the North African country as a means to keep migrants from arriving in the bloc and Libya would not be convinced with financial support, its Prime Minister Fayez al-Sarraj has noted.

Arrest warrant on Catalan ex-President cancelled by Spain

The Supreme Court of Spain cancelled a European arrest warrant for former Catalan regional leader Carles Puigdemont, as Germany refused to extradite him to face accusations of rebellion for declaring the independence of Spain's region, Catalonia in 2017.

Latvian government plans to allow handing expired food to charity

Latvia’s Agriculture Ministry has prepared amendments to the Law on the Supervision of the Handling of Food that provide permission to hand over certain types of food products to charity after the end of their expiry date.

Estonian industrial producer prices up 2.9% since June 2017

Estonian industrial producer price index has risen by 2.9% between June 2017 and the first summer month this year, resulting in an increase of export prices as well, Estonian statisticians have estimated.

Putin urges NATO to quit «irresponsibly» developing ties with Ukraine, Georgia

Russia's President Vladimir Putin cautioned NATO against developing deeper relations with Ukraine and Georgia, evaluating such a policy was irresponsible and would have consequences for the military alliance.

Latvian parliament not in a hurry to support president Vejonis for a second term

Political parties represented in the Saeima are not eager to support President Raimonds Vējonis for his remainder for a second term.

Weather in Latvia will remain warm and even hot at times

Weather in Latvia in the nearest couple of days will be dictated by a cyclone. Because of that the sky will be partially covered by clouds; thunderstorms are also expected, as reported by State Environment, Geology and Meteorology Centre.

Hungary sued in EU Court for criminalising help to illegal immigrants

The European Union's executive body has stated that a law in Hungary that criminalises support for illegal immigrants is in breach with EU law and Hungary has now been referred to the European Court of Justice for the alleged non-compliance.

Estonians buy alcohol in Latvia; country loses EUR 20 million in six months

Latvian stores located close to the Latvian-Estonian border have sold 1.6 million litres of strong alcoholic drinks in the first half year of 2019. This means Estonia has lost more than EUR 20 million in taxes, according to data from Association of Estonian Alcohol Producers and Importers.

Lithuania’s election watchdog slams ruling LFGU over popular TV series

Political messages can be channeled in various ways and the ruling now Lithuanian party, LFGU has chosen a very delicate way of the communications – through a TV series featuring the beauty and the ambiance of Naisiai, a picturesque settlement in Siauliai district.

Association: around 3,3000 people know of their HIV infection but receive no treatment

HIV remains a serious problem in Latvia – around 3,300 people are aware of their status but receive no treatment and continue spreading the infection. Because of that, it is necessary to act quickly for Latvia to lose its status as HIV kingdom and limit the spread of the infection, says Baltic HIV Association, informing decision-makers and responsible officials in institutions and hospitals about the HIV/AIDS situation.

Driver shortage may force reduction of international road haulage volumes

Latvia’s road haulage companies have started experiencing shortage of drivers. On top of that, if employment conditions for residents of non-EU member states do not change, it may be necessary to reduce the volume of road haulage volumes, says Latvijas auto president Valdis Trēziņš.

Lattelecom’s turnover up 9% in first half-year of 2018

Lattelecom Group’s turnover reached EUR 98.7 million in the first half-year of 2018, growing by 9% in comparison with the same period of 2017, according to unaudited financial results.

1,140 fewer births registered in Latvia in 2017

Since 2016 the number of births in Latvia is declining again. Compared to 2016, a total of 1,140 births fewer were registered in 2017. Also, the provisional number of births registered over the first six months of 2018 (9,664 children) is by 664 children smaller than that registered over the respective period of 2017.

Citadele Bank decides to reform Lithuanian subsidiary as a branch office

Citadele Bank has decided to reform its Lithuanian subsidiary as a branch office, as confirmed in the statement the bank submitted to Nasdaq Riga.

Russian pension age hike discussed amid protest outside Duma

As the Russian paliament votes on the proposal to gradually increase he pension age to 65 for men and 63 for women, some 200 people were seen protesting against the reform in Moscow.

Corruption watchdog chief says bureau has done no illegal actions

After going through Corruption Prevention and Combating Bureau’s past investigative activities, the bureau’s chief – Jēkabs Straume – found it confusing that officers often took no appropriate actions after acquiring evidence or receiving indications regarding necessary steps.

Illegal border crossings to Estonia on rise after Russia World Cup

Football fans with temporary residency permits of the Russia World Cup, or fan Ids, are trying to illegally cross the Russian border with Estonia, a member of the European Union.

Estonian 13-year-old lethally overdoses fentanyl

Estonian prosecutors have accused a 15-year old of negligent homicide after a girl, 13, passed away from fentanyl overdose.