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Monday 19.08.2019 | Name days: Melānija, Imanta

Economists predict hard times for Latvia’s manufacturing industry

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUNo growth is expected in Latvia’s manufacturing industry in the near future, economists from Swedbank, Luminor and Citadele Bank predict. In spite of global trends the decline in Latvia is not as major as previously expected.

Nevertheless, economists are confident – a decline in unavoidable.

«The situation in Latvia’s manufacturing industry is rather complicated. It’s not yet a crisis but it is definitely a period full of challenges,» comments Luminor economist Pēteris Strautiņš.

Driving force

Because April’s «growth factors» included manufacture of hardware, electrical equipment, computers, electronic and optical equipment and food, as well as repair and installation of equipment and hardware, Swedbank economist Linda Vildava predicts they will ensure longevity of growth, because they are some of the largest industrial production sectors. She also notes that growth has been observed in food production after several months of decline.

Citadele Bank’s economist Mārtiņš Āboliņš says repair and installation of equipment and hardware represent an important industry, which is why in the coming months there could be a decline there.

Strautiņš says manufacture of electronic hardware has grown the most rapidly in Latvia. Growth was secured by companies of foreign investors, such as Lexel fabrika and other well-known players.

«The entire post-Soviet era was as though American roller-coaster for 19th century-founded industrial giant RER, whose turnover in Q1 has more than doubled. It may even become the industry’s leader this year. Production of optic fibre continues rapidly developing, making Līvāni Latgale’s city with the most powerful export industry growth in the past five years,» comments Luminor expert. He predicts decline will continue in food production and wood processing.


«Sustained growth is especially topical in a time when the largest sub-industry – wood product manufacture – has experienced manufacture volume decline in the first month after a long period of time. This was but one month, so it is too soon to make any pessimistic conclusions. It is possible, however, that this outlines poor contribution previously mentioned by wood-working industry workers’ survey,» comments Vildava.

Āboliņš notes that output of wood-working industry has declined due to price corrections for lumber. He predicts some drops are expected for the industry in the rest of the year.

However, economists allow that lower prices will improve the situation with manufacture of furniture, because raw materials will likely become more accessible.

Strautiņš calms – there are other rapidly growing industrial sectors.

«Looking at economic growth based on paid wages, non-metallic mineral manufacturers are among the leaders together with paper and printed materials manufacturers. Over the course of five years wages of Latvian residents have grown by approximately two-thirds,» the expert notes.

«As industrial structure becomes more varied and the role of processing of natural resources reduces, we will become less dependent on weather conditions and global disasters with local effect. Currently we have to keep in mind that this future is gradually approaching,» comments Luminor experts.

Breath of the world

Vildava says that industrial output this year seems surprisingly good in spite of less than positive background.

«Processing industry’s growth in Europe is gradually becoming slower. Procurement managers’ index in Eurozone’s processing industry (this index is used to observe industry development trends before release of data) points to continued weakness in the region in the second quarter, with new orders and production volumes declining,» comments Vildava, adding that the uncertainty with Brexit and trade wars do not paint a pretty picture.

Āboliņš does not believe the situation could improve in the near future.

He says signals pointing towards construction industry’s slowing in Germany and Sweden could affect Latvia more heavily than the current slowing in the global economy.

«In Latvia, this industry’s growth has become more rapid at the beginning of the year, and the general mood of businessmen, although showing signs of decline, remains above average. Nevertheless, the longer the external environment remains in a bad spot, the more of a challenge it will provide Latvia’s industrial workers to maintain and increase production output,» predicts Swedbank economist.

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  1. Justs says:

    The E.U. is grinding Latvia into the dustbin of history. Your young people have all left and the country is nothing but a retirement home for drunken old people that are dying at age 58.

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