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Monday 23.07.2018 | Name days: Magda, Magone, Mērija
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Entrepreneur: many small and medium-sized businesses could drown in stagnation this year

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU2018 will be very intense for Latvia’s economy. It is predicted that thanks to exports and European Union funds, money will slow into the country, unemployment will decline and wages will grow. Predictions seem rather positive. However, the picture will likely be rather different for small and medium-sized businesses, says Turība University’s Business Management faculty dean, businesswoman and board member of SIA Sky Port Zane Driņķe.

Small and medium-sized businesses’ dynamics not expected to experience major fluctuations in 2018

The expert notes that medium-sized businessmen, looking at the current situation in the country’s economy, may become curious as to where positive predictions may come from.

She says that there are several aspects to consider – the number of active small and medium-sized companies has been growing lately, especially in production sectors. The number of newly-founded businesses has been growing steadily since 2003. This trend will continue in 2018.

Data from the Central Statistical Bureau of Latvia shows that 1,592 economically active small and medium-sized businesses were registered in Latvia. The number of liquidated businesses continues to decline. «This mean dynamics of small and medium-sized businesses is not expected to experience any major fluctuations. A slight increase will be observed in ICT technologies, as well as service and consultancy sectors. But is there enough reason to expect such a positive future?» said the entrepreneur.

External environment does not allow planning

The expert believes external factors do not allow small and medium-sized to plan effectiveness or development plans. «The external environment is not stable enough for small and medium-sized companies to plan and expand. This means there is a risk of drowning in stagnation. To prevent this from happening, businesses actively compete on the resource market. In 2018, businesses will continue experiencing a severe lack of qualified labour force. It should be said that the labour market will not be sufficiently saturated on a functional level,» comments Driņķe.

Homework for 2018

«I can only agree with experts that EU funds will help finances to flow into the country in 2018 – it will be a year of EU money. But life will continue after that as well, which is why I would not like to end up in a situation when we wait for 2019 with dread,» mentions the entrepreneur.

First of all, people should stop expecting demography to save the economy. «There isn’t a single re-emigration plan that can help Latvia recover a large number of compatriots return to their homeland and help the economy grow. We have to perform our homework on our own.»

According to the expert, most small and medium-sized companies try to realize their products and services on the domestic market, which is one of the biggest errors. A number of small and medium-sized businesses in the country offer goods and services with high added value, which is a competitive factor on export markets.

«Export means competition on the global market with ready-made products. Still, this is more appropriate for the current economic situation, because it helps allocate resources without putting everything in one basket. Our homework for 2018 is finding the best possible mechanism and start thinking on a global scale. Raising productivity can help smaller businessmen survive and avoid drowning in stagnation. This can be achieved by increasing wages, organizing work and/or investments,» explains Driņķe.

Small and medium-sized companies are the most competitive in the world

The expert says there is no real reason for a great deal of positive expectations for 2018, because EU funding will run out sooner or later. Businesses, however, have to find a way to survive even after that. There is some good news – small and medium-sized companies are the most competitive ones on a global scale.

«These businesses have the highest productivity per worker, as well as high employee satisfaction with work. Such businesses are more flexible when it comes to change. They are able to adapt their business form to tax and political changes,» she concluded.

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