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Ceturtdiena 12.12.2019 | Name days: Otīlija, Iveta

Economists: retail grows despite low consumption

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Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RUDespite stagnation, low purchasing power of Latvia population and cautious spending, retail trade total turnover is gradually surging, Latvian economists say, forecasting people will soon have more money to spend.

SEB bank macro economy expert Dainis Gaspuitis,

Despite stagnation and low purchasing power, retail trade will grow this year, reaching 4-5% growth. Consumers mood, future economic performance, fuel and food price fluctuations will play a considerable role. The increasing inflation can take away part of the potential climb, however it is to grow more moderate in the second half of the year.

Deposits show a part of the society keeps saving up, instead of spending, thus also subjective factors will have an impact on retail trade growth with budget consolidation always in the background. Also export-oriented sectors report more economic activities to be reflected in increasing remuneration. Similarly, especially in Riga, tourists will boost activity in supermarkets, allowing certain stores surpass 2008 performance in late 2010. However, part of the activity will also switch to the shadow zone with lower costs at the expense of taxes, the expert explains.

DnB Nord bank economy expert Peteris Strautins,

Retail trade turnover climb of 1.5% in February, compared to the previous month, and 3.6%, compared to February 2010, is no outstanding achievement, however it is a relief after the scary DnB NORD Latvia Barometer February survey showing dramatic mood of the people. Consumption recovery is slower than forecast in autumn, however, it must be clear that energy and food prices have skyrocketed since then. Moreover, taxes have been raised as well.

Non-food group, excluding fuel, turnover is a serious indicator suggesting the direction of the economy. This group includes goods rather not of the basic necessity. This group’s turnover sticks to 10% on annual basis. While the fact food sales recorded a 0.9% drop suggests either a bigger number of the needy or smaller population.

Speaking about the future, the logic is the same. Exports bring more more money to Latvia and also more European Union funds will be acquired this year. Similarly, money is drawn also through the banking system. All this will result in more money to spend but we cannot be sure whether people will really do that. Judging from the nature of Latvians, they will not be able to abstain from saving long. Afterwards domestic demand will propel further new jobs creation giving way to an even faster consumption growth. Consequently, economy heating will exist on its own, no longer to be affected by short-term downfalls in export markets.

Swedbank senior economist Lija Strasuna,

Retail trade growth does not suggest anything extraordinary, it is just 3.6% (excluding 5.4% for fuel). Growing utility bills, due to the cold weather and tax rise, definitely had an impact on it. Consequently, people had less money to consume other goods and services. Slow employment and remuneration climb is expected this year to support household consumption and retail trade turnover surge. Crediting will gradually grow more active as well along with improving economic activity and banks profitability. At the same time consumers’ mood raises concern, as it keeps hovering around the same level for a year already. This suggests people are quite cautious with their spending, affected by tax increases and subsequent price gains that strengthen inflation expectancy – all this will limit household consumption growth this year.

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  1. Ival says:

    Kick the tires and light the fires, problem oficfially solved!

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